As domestic battery makers that had struggled in recent years due to the electric-vehicle chasm (temporary demand slowdown) all posted profits in the second quarter, attention is turning to results in the second half. With the EV market gradually recovering in Europe and Asia, and demand rising for data center batteries and energy storage systems (ESS) thanks to recent expansion of investment in artificial intelligence (AI), forecasts point to favorable winds continuing into the second half.
According to the battery industry on the 3rd, LG Energy Solution, Samsung SDI, and SK On, which released second-quarter results on the 30th, all posted operating profits. It was the first time in seven quarters that the three battery makers were simultaneously in the black on a quarterly basis since the third quarter of 2024.
LG Energy Solution, which has the largest sales scale, reached 756.02 billion won in second-quarter sales, up 24.8% from a year earlier, and recorded 113.3 billion won in operating profit. Operating profit plunged 77%, but the company said that was because a large one-time revenue was reflected in the second quarter of last year.
In the second quarter of last year, LG Energy Solution recorded 492.2 billion won in operating profit as 490.8 billion won in advanced manufacturing production credit (AMPC) under the U.S. Inflation Reduction Act (IRA) came in. Excluding the tax credit, operating profit was only 1.4 billion won. Taking that into account, the second quarter of this year is assessed to have seen profit increase by more than 110 billion won.
Samsung SDI delivered an earnings surprise, posting results far above financial market expectations. Samsung SDI recorded 203.8 billion won in operating profit in the second quarter, returning to profit for the first time in seven quarters. Over the same period, sales rose 18.5% to 3.7688 trillion won.
According to FnGuide, before the results were released Samsung SDI was estimated to post an operating loss of 70 billion won. Compared with a loss of 397.8 billion won a year earlier, that would have been a sharp narrowing, but securities industry analysts still expected it would not avoid the red.
SK On also saw a marked improvement in results. The day before, SK Innovation said operating profit at its battery subsidiary SK On reached 821.8 billion won in the second quarter, the highest on record on a quarterly basis. SK On posted 24.1 billion won in operating profit in the third quarter of 2024 and achieved a profit again after seven quarters.
One-off factors played a large role in the improved second-quarter results at battery makers. Samsung SDI received 107.7 billion won in AMPC from the United States. SK On did not disclose a specific amount, but its results reflected AMPC along with a large compensation payment from an automaker client. The compensation refers to money paid to SK On because automakers failed to purchase the contracted amount of batteries amid the EV market slump.
Financial markets and the industry are focusing on the rapid improvement in battery market conditions. Although one-off factors contributed to better results, the recovering EV market and the steep growth in the ESS market are also lifting business profits. For these reasons, many analyses say the trend of improving results at battery makers is highly likely to continue in the second half.
ESS is cited as the business that will drive better second-half results. In particular, as investment in renewable energy facilities and AI data centers continues to rise in North America, observers say demand for ESS batteries will keep increasing.
On its second-quarter earnings call, LG Energy Solution said, "As production capacity in the North American market expands, third-quarter ESS shipments will surge 50% from the prior quarter, and cylindrical battery supply and EV volumes are also expected to increase," adding, "Third-quarter sales will grow more than 20% from the prior quarter." Samsung SDI will also begin producing ESS batteries in October at its joint-venture plant with Stellantis in Indiana.
Shinhan Investment & Securities recently identified the North American ESS market as the most important growth axis for the battery industry in a report. It forecast U.S. ESS demand would expand from 90 GWh last year to 160 GWh in 2030. In particular, it projected that demand for data center ESS, driven by increased AI investment, would grow from 9 GWh last year to 40 GWh in 2030, posting an annual growth rate of more than 30%.
Domestic manufacturers are highly likely to benefit directly from rising U.S. ESS demand, as the United States is tightening restrictions on Chinese battery companies.
Lee Jin-myeong, an analyst at Shinhan Investment & Securities, said, "The United States is simultaneously applying a 43.4% tariff and subsidy limits to Chinese ESS batteries, while offering tax credits of up to 40% for ESS projects that meet U.S.-made component requirements," adding, "This structure favors Korean battery companies that have secured production capacity in North America."
The gradual recovery of the EV market, which had languished in recent years, is also seen as a positive. In the United States, the EV market has slowed since last Oct. after the Donald Trump administration took office and eliminated tax credits for new EV buyers, but other global markets such as Europe are showing solid growth.
In the first half of this year, EV sales in Europe jumped 40.5% from a year earlier to 1,228,90 units. In Korea as well, new EV registrations reached 198,969 over the same period, up 112.6% year over year.
In Europe, the impact came as some countries recently expanded EV subsidies. Germany ended its EV subsidy program at the end of 2023, but resumed it this year and decided to continue support through 2029. The low-price offensive by Chinese EV brands, which are pushing inventory into global markets as domestic demand weakens, also contributed to higher sales in Europe.
A battery industry official said, "Domestic companies have strengths in the higher-priced NCM (nickel-cobalt-manganese) batteries, so they are expected to face tough competition from Chinese manufacturers strong in the cheaper LFP (lithium iron phosphate) batteries," but added, "The fact that the overall EV battery market, including Europe, is coming back to life will act as a positive for results."