LG Energy Solution (LGES) has announced plans to reduce capital expenditure following weak earnings, primarily attributed to slow growth in electric vehicle (EV) sales. The South Korean battery manufacturer reported an operating profit of 157.3 billion won (US$114 million), a 75.2% decline compared to the previous year.
“We will have to cut capital expenditure considering sluggish EV market conditions and client demand,” stated Lee Chang-sil, LGES’ Chief Finance Officer.
The company reported an operating loss for the first quarter, with the exclusion of the advanced manufacturing production credit (AMPC) from the Inflation Reduction Act (IRA). The company’s AMPC totaled 188.9 billion won (US$137 million).
In October 2023, LGES had revised its revenue expectations for 2024, citing concerns over high interest rates impacting electric vehicle sales. The slowdown in EV sales has reportedly affected numerous automakers, including legacy OEMs like Ford and Hyundai, as well as EV manufacturers like Tesla.
During Tesla’s Q1 2024 earnings call, Elon Musk commented on the decline in battery orders from EV automakers. “What seems to be happening is that the orders for batteries from other automakers have declined dramatically. So, we’re seeing much more competitive prices for sales from our suppliers, dramatically more competitive than in the past. It is clear that a lot of our suppliers have excess capacity,” Musk remarked.
In response to the slowdown in EV sales, legacy automakers have begun shifting focus to plug-in hybrid production. For example, Hyundai recently announced plans to invest more in its upcoming Metaplant in Georgia to produce hybrids. The Georgia Metaplant was initially intended to be solely dedicated to electric vehicle production.
