Earnings at Korea's three battery makers, including LG Energy Solution, Samsung SDI, and SK On, are expected to remain weak this year after disappointing results in the fourth quarter of last year. The hit comes as battery manufacturers face a direct blow from the United States scrapping the tax credit for electric vehicles last September, followed by Europe recently moving to slow its EV mandates.
According to the battery industry on the 17th, LG Energy Solution posted an operating loss of 122 billion won in the fourth quarter of last year, based on preliminary figures. Excluding the advanced manufacturing production tax credit (AMPC) under the U.S. Inflation Reduction Act, the fourth-quarter operating loss comes to 454.8 billion won.
AMPC is a program that directly refunds 30% of investment to corporations that make batteries and related parts in the United States, and also provides subsidies of $45 per kWh (kilowatt-hour).
LG Energy Solution remained in the black from the first through the third quarter of last year, but swung to a loss in the fourth quarter. Its annual operating profit is expected to be around 1.4 trillion won.
Samsung SDI, which will release last year's results on Feb. 2, is expected to have logged operating losses for four consecutive quarters. According to financial data firm FnGuide, Samsung SDI is estimated to have posted an operating loss of 300.3 billion won in the fourth quarter.
After recording an operating loss of 434.1 billion won in the first quarter of last year, Samsung SDI continued to struggle in the red in the second quarter (397.8 billion won) and third quarter (591.3 billion won). If the negative trend continued in the fourth quarter, the annual operating loss is expected to reach the 1.7 trillion won range.
SK On will release last year's results on the 28th of this month together with its parent, SK Innovation. SK On's fourth-quarter operating loss is estimated to be in the 200 billion won range. SK On recorded a profit in the third quarter of 2024, but turned to a loss in the fourth quarter and has posted losses for four consecutive quarters. Adding the estimated fourth-quarter operating loss, the total loss last year comes to the 690 billion won range.
Including LG Energy Solution, whose results had been rebounding, all three companies posted deteriorating results in the fourth quarter of last year because electric-vehicle demand plunged after the Donald Trump administration ended the tax credit. The Trump administration ended the EV purchase tax credit of up to $7,500 per vehicle as of Sept. 30 last year. Da.
According to U.S. auto market researcher Cox Automotive, new EV sales in the United States in October last year were 74,835 units, a sharp drop of 48.9% from the previous month. In November and December, they showed a similar trend at 70,255 and 84,910 units, respectively.
The slump in the U.S. EV market appears likely to continue this year. Market research firm Benchmark Mineral Intelligence (BMI) forecast that U.S. EV sales this year will fall 29% from a year earlier to 1.1 million units.
As the U.S. EV market is increasingly likely to face a downturn for the time being, U.S. automakers are canceling supply contracts they had signed with Korean battery companies. LG Energy Solution canceled EV battery supply contracts worth 13.5 trillion won just last month, and SK On ended its U.S. plant joint venture arrangement with Ford.
The European EV market, which domestic automakers had focused on, has also become unlikely to see rapid growth. The European Union (EU) effectively scrapped its original goal of "100% emissions reduction (outright ban) by 2035." As major automakers in Germany and France struggle to compete in the EV market, the EU is seen as having decided to delay the timeline for mandating EVs.
With the EV market likely to remain in a downturn, earnings forecasts for the three battery makers this year are being revised downward. The expected first-quarter operating profit for LG Energy Solution compiled by securities firm research centers was 502.4 billion won three months ago, but has now fallen to 183 billion won. Samsung SDI's operating loss for the first quarter of this year is projected at 238.6 billion won, and SK On's at around 150 billion won.
A battery industry official said, "To make up for declining EV demand, all three companies have recently turned their attention to the energy storage system (ESS) market," adding, "We are focusing on securing production capacity by converting part of the existing lines into ESS-dedicated battery lines."