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LG Energy Solution's Quarterly Loss: A Blip or a Trend?

Cyrus ColeFriday, Jan 24, 2025 12:12 am ET
2min read


LG Energy Solution (LGES), a leading South Korean battery manufacturer, posted a quarterly loss for the first time in three years, raising concerns about the company's financial health and the broader battery market. The company reported an operating loss of 225.5 billion won ($154 million) in the fourth quarter of 2024, compared to a profit of 338.2 billion won in the same period a year earlier. This significant downturn can be attributed to two primary factors: slowing demand for electric vehicles (EVs) and the impact of the U.S. Inflation Reduction Act (IRA).



The global EV market is currently experiencing a slowdown, known as the "chasm," which has led to reduced EV sales and, consequently, lower demand for batteries. This stagnation has affected LGES's major customers, including Tesla, General Motors, and Hyundai Motor, who have all had to adjust their production plans and strategies to mitigate the impact. For instance, General Motors has scaled back its EV production goals, leading to lower battery orders for LGES (Source: Yonhap, Jan. 9, 2025).

The U.S. Inflation Reduction Act (IRA), signed into law in August 2022, includes provisions that incentivize domestic battery production and limit the use of foreign-made batteries in certain applications. While the IRA and Advanced Manufacturing Production Tax Credit (AMPC) provided tax credits to energy-friendly product manufacturers, the benefits were not enough to offset the decline in EV sales. LG Energy Solution reflected 377.3 billion won in incentives in the fourth quarter, but the losses expanded to 602.8 billion won when excluding these tax credits (Source: Reuters, Jan. 9, 2025).

LG Energy Solution's quarterly loss is a stark reminder of the challenges facing the battery industry, particularly in the face of geopolitical tensions and high valuations. The ongoing trade tensions between the US and China have disrupted global supply chains, leading to increased competition among battery manufacturers. Chinese companies like CATL and BYD have gained market share at the expense of Korean and Japanese competitors like LGES, Samsung SDI, and SK On (Source: Reuters, Jan 9, 2025). Additionally, the IRA has created uncertainty for LGES, as it may face reduced demand from US-based customers like Tesla and General Motors.

Despite these challenges, LG Energy Solution remains committed to innovation and sustainability. The company was recently ranked 12th on the list of 100 Most Sustainable Corporations in the World 2025 by Corporate Knights, securing the top position among its battery manufacturing peers. This recognition highlights LGES's dedication to strengthening its ESG standards and practices, as well as its commitment to facilitating a sustainable battery ecosystem throughout its entire value chain (Source: Corporate Knights, Jan 22, 2025).

In conclusion, LG Energy Solution's quarterly loss is a wake-up call for the battery industry, highlighting the challenges posed by geopolitical tensions and high valuations. However, the company's commitment to innovation, sustainability, and strategic investments can help it navigate these challenges and maintain its position as a global leader in the battery industry. As the EV market recovers after 2026, LGES is well-positioned to capitalize on the rebound and continue its growth trajectory.
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