LG Energy Solution is ‘proactively responding to market volatilities’ that have seen the South Korean battery manufacturer’s annual operating profits slide 73.4%.
The company said that those responses include continued switching battery cell lines between manufacturing of electric vehicle (EV) and energy storage system (ESS) products as it announced fourth quarter and full-year 2024 financial results last week (24 January).
For Q4 2024, consolidated revenue was KRW6.45 trillion (US$4.45 billion), versus KRW8 trillion in Q4 2023, falling by 19.4%, while operating profit for the final quarter of last year was recorded as a loss of KRW226 billion, sliding 167% from KRW338 billion in Q4 2023.
LG Energy Solution (LG ES) posted KRW25.6 trillion (US$17.7 billion) consolidated revenue for 2024, down 24% year-on-year from KRW33.7 trillion in 2023, and KRW575.4 billion operating profit, down 74% from KRW2,163 billion the previous year.
Nonetheless, the manufacturer was able to record a positive operating profit margin at 2.2%, largely attributed to the upside of Inflation Reduction Act (IRA) tax credits in the US. Excluding the tax credits, operating profit margin would have been -3.5% for the full year.
Slowdown in European EV demand, uptick in North American demand for ESS
The company currently does not break out financial or performance metrics between its EV and ESS segments. However, it mentioned some existing and potential headwinds for the electric mobility industry while it appeared to factor in tailwinds for ESS demand—particularly in North America—that it forecast for 2025.
LG ES said the revenue decline for 2024 was due to the slowdown of growth in the European EV market, as well as the low prices of metals impacting average sale price (ASP).
Meanwhile, in North America sales volume grew by more than 70% year-on-year, and LG ES claimed that the ‘first-mover advantages’ it has secured by establishing manufacturing facilities in the US market will expand on the back of the growing trend of protectionism and increased emphasis on sourcing domestically made products.
The company also played up the foothold it is aiming to establish in the large-scale battery energy storage system (BESS) market in North America. Its North American energy storage system integrator subsidiary LG ES Vertech has recently signed multi-gigawatt-hour supply deals with US clean energy developer Terra-Gen (8GWh) and investment platform Excelsior Energy Capital (7.5GWh), for example.
LG ES is closely monitoring potential changes to the IRA and tariffs under the new Trump presidential administration in the US, CFO Chang Sil Lee said in an earnings call to explain results.
These changes could include reductions in EV purchase subsidies and targeted tariffs on specific countries and the company is preparing a number of scenarios to ‘respond proactively’ to changes, including maximising utilisation of manufacturing capacity, Chang Sil Lee said.
As we have already seen from the first day of Trump taking office on 20 January, the new Republican president appears keen to roll back policies supporting EV demand and manufacturing while promoting the use and export of fossil fuels, taking the US out of the Paris Agreement on climate, as he did previously in his 2016-2020 term.
While the ‘increasing volatility of green policies in major countries’ including the US is expected to slowdown the growth of demand for EVs in the short-term, LG ES said that the drivers for stationary battery storage are growing due to the rising importance of energy security, which locally generated renewable energy facilities can bolster.
The manufacturer also shares the view held by many in the BESS industry that rising electricity demand from data centres will create a ‘surge’ in demand for power solutions including storage.
At the same time, with the US already set to raise Section 301 tariffs on imported Chinese batteries for BESS to 25% in 2026 (from 7% today) under Biden-era policy and Trump signalling his desire to raise or implement new tariffs before even taking office on 20 January, LG ES claimed it is in a strong position to meet demand with domestically made batteries from its US factories.
In fact, LG ES estimates that it will produce between 45GWh and 50GWh of battery capacity eligible for IRA tax credits during 2025, and has taken measures such as investing in a lithium mining venture in Australia which would enable it to utilise critical minerals and LFP1 cathode materials compliant with IRA requirements.
Production strategy and 2025 guidance
LG ES had put its plan for dedicated BESS cell production lines with 16GWh annual capacity in Arizona, US, on hold. Company executives told Energy-Storage.news last year that LG ES will still establish that level of manufacturing to meet growing demand by instead favoured utilising existing lines within the country, repurposing them from EV cell production.
Previously, as it reported falling profitability with its Q2 2024 results, the company told Energy-Storage.news in a statement that it was also considering a pivot of some of its existing production, including lines at its plant in Wrocław, Poland, towards ESS cells. The Wrocław plant is currently Europe’s biggest lithium-ion battery gigafactory with 86GWh annual production capacity, and may have helped it win a 900MWh BESS tender for a project there last week.
The company said with its latest financial results release that it will continue to convert production lines between EV and ESS batteries as it responds proactively to customers’ needs.
It promised an adjustment of its timeline of investments in new production facilities and to prioritise ‘critical investments,’ which it said would enhance financial stability, while also repurposing idle production lines in existing facilities to manufacture lithium iron phosphate (LFP) and high-voltage mid-nickel batteries.
LG ES will also seek to be more competitive with its products on both the EV and ESS segments by optimising batteries for EV solutions and focusing on differentiating its high capacity LFP batteries for ESS applications.
It said investments in upstream companies will be promoted, along with use of ‘cost-effective materials’ and increase levels of automation in production. Longer-term strategies include accelerating the commercialisation of dry electrode technology and a new line of lithium-sulfur solid-state batteries along with the expansion of software offerings such as energy-as-a-service (EaaS) business lines.
The manufacturer claimed it will also lower costs this year, including a goal to reduce CapEx by 20% to 30% versus 2024 numbers.
LG ES offered guidance to achieve a 5% to 10% year-on-year revenue growth in 2025 despite the unfavourable ASP environment being expected to continue.
CFO Chang Sil Lee said LG ES expected the first quarter to be challenging, with major automotive OEMs making conservative demand forecasts and demand from the ESS and IT sectors being seasonally quite low in first quarters of each year.
While the CFO said LG ES expected to see a “gradual recovery in demand” from Q2 onward, held on by new EV launches and increased need for localised production of BESS equipment, the company did not expect that market demand will fully recover until after 2026.
A project the firm deployed was recently in the headlines for the wrong reasons. January 16 saw a huge fire at the 100MW/400MWh Phase 1 of the Moss Landing BESS in California, US, which LG ES deployed (along with Phase 2) using its LG ES Transportable Rack (TR1300). Energy-Storage.news has published an in-depth review of what we know so far.
