A major battery manufacturer that supplies electric vehicle makers including Tesla and General Motors has announced significant financial losses for the first quarter of this year.
LG Energy Solution, based in South Korea, revealed Tuesday that it anticipates an operating loss of 208 billion won, equivalent to approximately $138.16 million, during the January through March period. The company attributed the red ink to declining orders from electric vehicle manufacturers.
The projected loss exceeded Wall Street expectations, which had predicted a smaller deficit of 160 billion won according to LSEG SmartEstimate forecasts from financial analysts.
The battery manufacturer, which also counts Hyundai Motor among its clients, has been struggling with reduced demand for EV batteries. Contributing to this challenge, General Motors temporarily shut down a Detroit electric vehicle manufacturing facility until April.
Company officials said revenue is expected to drop 2.5 percent compared to the same period last year, falling to 6.6 trillion won.
The financial projections include tax benefits from the U.S. Inflation Reduction Act related to the company’s American battery manufacturing operations, according to a regulatory document filed by LG Energy Solution. Without these federal tax incentives, the operating loss would have reached 398 billion won.
To counter the weakness in electric vehicle battery sales, the company is pivoting toward energy storage systems, which are experiencing increased demand due to growing electricity requirements for artificial intelligence data centers.
In February, LG Energy Solution announced plans to triple its energy storage system revenue this year compared to 2023. Investment firm Nomura projects the company’s energy storage revenue could reach approximately 2.8 trillion won by 2025.
Financial analysts believe recent U.S. legislation could benefit South Korean battery manufacturers. The CHARGE Act, introduced in Congress last month, would prohibit imports of certain Chinese-manufactured energy storage systems due to concerns about potential remote monitoring capabilities in products made in China and shipped to the United States.
LG Energy Solution plans to release comprehensive quarterly earnings results on April 30.
