LG Energy Solution (LGES) recently announced a reduction in investments following a decline in earnings, primarily linked to a slowdown in electric vehicle (EV) sales growth. The company’s Chief Finance Officer, Lee Chang-sil, stated that they will need to cut capital expenditure due to sluggish market conditions and decreased client demand. The South Korean battery manufacturer reported an operating profit of 157.3 billion won (US$114 million), a significant decrease of 75.2% compared to the previous year.
Additionally, the company’s AMPC totaled 188.9 billion won (US$137 million). The impact of slowing EV sales is not limited to LGES, as it is reportedly affecting numerous automakers, including traditional OEMs such as Ford and Hyundai, as well as EV manufacturers like Tesla. During the TSLA Q1 2024 earnings call, Elon Musk mentioned a decline in battery orders from EV automakers, which has led to increased competition among suppliers, resulting in more competitive prices.
Legacy automakers are adapting to the change, with some focusing on plug-in hybrid production amidst the decrease in EV sales. For example, Hyundai’s Georgia Metaplant, initially intended for exclusive electric vehicle production, reflects this shift in strategy.