LG Energy Solution stated that it is preparing various scenarios for the policy changes of the Trump administration, which are increasing uncertainty in the industry and the market.
In the conference call held for the fourth-quarter earnings report of last year, LG Energy Solution noted, "As the protectionist trend in the United States intensifies, the effects of proactively entering the North American battery market are expected to expand."
Currently, electric vehicle battery companies are receiving tax credit benefits of $35 per kilowatt-hour for cells produced and sold in the United States under the Inflation Reduction Act (IRA) 45X clause, and $10 per kilowatt-hour for modules (packs). Consumers purchasing electric vehicles are eligible for a maximum tax credit of $7,500 under the IRA 30D clause.
The company forecasted, "The possibility of the repeal of the 30D clause among IRA policies appears high, while the 45X clause does not seem to have significant fluctuations."
Regarding tariffs, the company stated, "It seems that only certain countries requiring commercial pressure will be targeted rather than universal tariffs," and added, "While it may impact the market in the short term, we believe the future direction will not change. We will increase production capacity (CAPA) operations through immediate and proactive response systems."
The company projected that sales in the first quarter of this year would remain at the level of last year's fourth quarter, while profitability is expected to improve.
Regarding short-term profitability, the company added, "The negative impact of falling metal prices on battery prices has decreased, and the high exchange rate is also helping. We will meaningfully improve profitability by leveraging this exchange rate situation."
Regarding the annual industry outlook, the company explained, "We view that a gradual recovery in volume will occur, starting from the first quarter. Major automakers have new electric vehicle launch plans scheduled, and new projects such as the Stellantis and Honda joint venture will begin in North America," and noted, "As local demands from automakers are increasing, our proactive entry into North America is becoming a good opportunity for the company."
The company plans to reduce its capital expenditure (CAPEX) this year by about 3 trillion won compared to last year (13 trillion won). Regarding funding methods, it stated, "We prioritize covering it with internal funds generated from operations, but we are also planning external funding sources such as loans if necessary. This year, we are considering financing through bond issuances similar to last year."
The company plans to accelerate its energy storage system (ESS) business. It stated, "In order to quickly respond to local demand in North America, we are preparing to advance the local production of lithium iron phosphate (LFP) battery-equipped ESS, which was originally planned for 2026, to the first half of this year."
The company added, "Rather than establishing new facilities in new regions, we believe it is appropriate to utilize existing production facilities, and we are reviewing the purchase of three GM joint ventures as one of several methods to respond to local demand."
Regarding the production plan for prismatic batteries, the company stated, "We are determining the optimal solution with our joint development partner, GM. At this point, it is difficult to specify the exact mass production timeline," and added, "We have various technologies for pouch-type batteries, and we believe that based on this, we can achieve sufficient competitiveness in prismatic batteries as well."
LG Energy Solution recorded sales of 6.4512 trillion won and an operating loss of 225.5 billion won in the fourth quarter of last year. Compared to the fourth quarter of 2023, sales decreased by 19.4% and turned into a loss. This marks the first quarterly loss recorded in over three years since the third quarter of 2021.
The operating profit for the fourth quarter of last year included 377.3 billion won in advanced manufacturing production tax credits (AMPC) under the Inflation Reduction Act (IRA). Excluding this, the operating loss for the fourth quarter of 2024 is 602.8 billion won, and the operating profit margin is -9.3%.
For the entire year of 2024, revenue is projected to be 25.6196 trillion won and operating profit is 575.4 billion won. Compared to the previous year, revenue decreased by 24.1% and operating profit by 73.4%.