South Korean battery maker LG Energy Solution Ltd. is confident of meeting its 30% sales growth target for this year, boosted by demand for electric cars and US tax credits.
(Bloomberg) — South Korean battery maker LG Energy Solution Ltd. is confident of meeting its 30% sales growth target for this year, boosted by demand for electric cars and US tax credits.
“EV demand in North America remains very strong,” Chief Financial Officer Lee Chang-sil said on a call after the Seoul-based company reported first-quarter net profit of 500.6 billion won ($374 million), which beat analyst estimates. “Although demand in Europe seems to be limited and metals prices are falling, we’re pretty sure we can meet our initial goal for 30% sales growth for 2023.”
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The company’s shares rose as much as 2.4% in early Seoul trading, taking this year’s gain to almost 30%.
LG Energy expects it will get tax credits from the US Inflation Reduction Act — which is aimed at bringing more battery and EV production to the US — for 15 GWh to 20 GWh of production in 2023. The company, which supplies Tesla Inc., General Motors Co. and Ford Motor Co., eventually aims to have around 250 gigawatt hours of production capacity in the US and develop cylindrical batteries and energy storage systems based on lithium-iron-phosphate batteries.
Read more: LG Energy Solution to Spend $5.5 Billion on US Battery Plants
Meantime, LG Energy is trying to secure battery minerals in order to comply with Europe’s Raw Materials Act, which like the IRA seeks to reduce reliance on Chinese metals for EV batteries. Shortly after the earnings were released, LG Energy said it had signed a $23 billion deal with Posco Future M Co. to supply high-nickel cathode materials.
North American sales will jump this year, with production set to accelerate at a plant jointly built with GM because the US automaker is speeding up output of EVs, according to a note by Yongjin Jung, an analyst at Shinhan Investment Corp. The tax benefits from the IRA will grow every year as US production capacity rises, Jung said.
While prices of battery metals slumped during the first quarter, especially lithium in China, pushing down the price of batteries, the decline won’t hurt profitability, LG Energy’s Lee said. “Fortunately, we have signed contracts with carmakers based on floating rates,” he said.
LG Energy is testing so-called 4680 batteries, the cylindrical cells used by Tesla, at a plant in South Korea, and aims to start mass production by the end of this year.
It’s also considering developing lithium-iron-phosphate cells for EVs, a market dominated by Chinese companies. The iron-based cells are cheaper than nickel-based batteries, which LG has focused on so far.
The Korean company is confident of beating its Chinese rivals, in the US at least.
“It won’t be easy for the Chinese companies to enter the US,” Lee said. “It’s not just a matter of investment. You need a lot of experience to build supply chains and operate plants. It takes a lot of time.”
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