LG Energy Solution forecasts cautious 2025 amid declining EV demand

South Korean battery maker LG Energy Solution (LGES) has offered a more conservative view for the company's revenue growth in 2025, noting a steep decline in EV demand as the reason. Plans to cut capital expenditure were announced by the company after it reported a 39% drop in operating profit for the third quarter of 2023.

On Monday, CFO Lee Chang-Sil noted that key factors affecting the company's outlook include ongoing macroeconomic uncertainties, geopolitical tensions, and the rise of Chinese battery manufacturers as competition. Lee also said that many automakers are rethinking their electrification strategies, including what comes after next week’s presidential election, when it seems several U.S. climate policies could change.

Lee also said we are expecting a rather conservative revenue growth next year, capital expenditure is going to be down, with exception for essential investment. LGES, however, had previously announced plans to slash capital expenditure earlier this year due to a slow down in EV sales.

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Largely out of an inability to offer affordable EVs, the lack of charging infrastructure and intense competition from cheaper Chinese models, automakers are struggling to meet their electrification targets. Europe's recovery is expected in 18 months and the U.S. in two to three years, a senior LGES executive said, assuming future climate policies and regulatory environments.

In the US, Donald Trump's stance on EV tax credits could lead to further slowing of EV demand growth, said analyst Kang Dong-jin of Hyundai Motor Securities.

LGES reported an operating profit for the quarter July-September of 448 billion won (about USD 322.84 million) in line with expectations, but down from 731 billion won in the same period a year ago. Gains from a more buoyant demand from a number of European and North American automakers helped push the company past the LSEG SmartEstimate of 374 billion won. Revenue, however, plunged to 6.9 trillion won, 16% lower year on year, and LGES warned it would have incurred an operating loss but for a tax credit to which it qualified under the U.S. Inflation Reduction Act.