LG Energy shares drop as EV demand weakens
LG Energy stock drops 4% on weak EV demand
LG Energy Solution Ltd., a major player in the global electric vehicle (EV) battery market, reported a surprising operating loss for the fourth quarter of 2024.
The South Korean company posted an operating loss of 225.5 billion won ($154 million) for the quarter ending December 31, starkly contrasting with analysts' expectations of a 16.4 billion won profit, reports Bloomberg.
Revenue fell 19% year-over-year to 6.45 trillion won, further underlining the strain on the company’s operations. Following the announcement, LG Energy shares dropped as much as 4% in intraday trading, marking the steepest decline since December 20.
EV industry faces challenges
The disappointing performance is largely attributed to a cooling global EV market. In the United States, General Motors Co.—one of LG's key customers—has faced disruptions, including the shutdown of its Cruise autonomous vehicle unit and scaled-back EV production targets. In Europe, demand for EVs has weakened due to higher living costs and the rollback of government subsidies in certain markets.
Carmakers such as BMW AG and Mercedes-Benz Group AG are grappling with rising competition from Chinese manufacturers and subdued EV sales. Battery pack prices fell 20% in 2024 due to overcapacity in the market. Manufacturers have slashed prices to remain competitive, further squeezing margins for producers like LG Energy.
Shifting market dynamics
Chinese battery makers are rapidly expanding their dominance. Contemporary Amperex Technology Co. Ltd. (CATL) and BYD Co. together accounted for 52% of the global EV battery market in Q3 2024, while LG Energy held an 11.2% share, according to SNE Research. Chinese firms' cost-effective lithium iron phosphate (LFP) batteries are increasingly replacing the nickel-based NCM batteries that LG specializes in, exacerbating the competitive pressure.
With EV makers adjusting inventory and scaling back battery orders, particularly in the U.S., analysts foresee continued challenges for LG Energy. Minwoo Ju of NH Investment & Securities Co. specifically highlighted lower-than-expected battery demand from GM. The global shift towards LFP batteries and intense price competition will likely necessitate strategic adjustments for LG to sustain its market position in 2025.
Reminder, shares of South Korean companies linked to Squid Game saw significant declines following the mixed reception of the show’s second season.
