By Heekyong Yang and Joyce Lee
SEOUL (Reuters) -South Korean battery firm LG Energy Solution (LGES) warned on Wednesday of slowing revenue growth in 2024 due to global economic uncertainties affecting the outlook for electric vehicle sales, sending its shares down more than 6%.
It joins a growing number of automakers and suppliers expressing caution about demand for EVs, as they fear high interest rates lifting financing costs and sputtering growth in major economies such as China and Europe will impact car buyers.
LGES, which supplies Tesla, General Motors and other automakers, said revenue growth in 2024 would not be as high as the mid-30% rate forecast for this year, as it expects EV demand will be below its earlier expectations.
GM, its joint venture partner in an Ohio battery plant and two more under construction in the U.S., said on Tuesday that it was slowing the launch of several EV models to cut costs and pulling back on EV product spending to put profits ahead of sales targets.
“LGES shares were down even before the earnings announcement mostly because of GM’s earnings overnight, but we saw further drops during LGES’ earning conference call, because the company said it expects revenue growth in 2024 would not be as big as what they saw in 2023, which had an impact on investors who already were concerned about demand,” said Kang Dong-jin, an analyst at Hyundai Motor Securities.
However, LGES said it was boosting the production capacity of wholly-owned its Arizona battery plant to 36 gigawatt hour (GWh) from 27 GWh, as it seeks to take advantage of tax credits offered to U.S. manufacturing.
LGES added that it planned to produce energy-dense 46-series cylindrical battery cells at its Arizona plant, aiming to start production in late 2025.
The company posted a 40% rise in third-quarter profit, helped by increased output from its Ohio joint venture factory with GM.
LGES reported an operating profit of 731 billion won ($543.46 million) for the July-September period, up from 522 billion won a year earlier and in line with its earlier estimate of 731 billion won.
It was above a 659 billion won average forecast by LSEG SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate.
The company’s shares dropped as much as 6.35% in morning trade, hitting lowest since January, versus the benchmark KOSPI’s 0.2% fall.
LGES reported September quarter revenue rose 7.5% year-on-year to 8.2 trillion won. But it was down 6% from the June quarter due to a demand slowdown in Europe, production adjustments by automakers and lower metal prices.
($1 = 1,345.0800 won)
(Reporting by Heekyong Yang and Joyce Lee; Editing by Miyoung Kim and Jamie Freed)