After reporting a 39% decline in third-quarter profits, South Korean battery manufacturer LG Energy Solution said that it had a “conservative” outlook for revenue growth in the upcoming year and that it will drastically cut capital expenditures as a result of the decreasing demand for electric vehicles.
According to its CFO, the company, which supplies Tesla, General Motors, and Hyundai Motor, also anticipates that the outcome of the U.S. presidential election next week will significantly affect the trajectory of the EV market.
On an earnings call, Chief Financial Officer Lee Chang-Sil stated, “Looking ahead to 2025, we see continued macro uncertainty and geopolitical risk, increased (battery) exports by Chinese rivals, as well as (automaker) customer plans to manufacture their own batteries, which would intensify competition.”
“When it comes to revenue growth next year, we have a rather conservative outlook,” Lee stated. “We expect capital expenditure to be significantly reduced next year compared to this year, with the exception of some essential and necessary investment.” LGES announced in April that it will cut capital spending this year because EV growth was stalling. Earlier this year, it also predicted that 2024 capital expenditures would be comparable to the 10.9 trillion won spent the year before.
Due to the sluggish demand for EVs caused by a number of factors, such as the shortage of inexpensive models, the delayed proliferation of charging stations, trade conflict, and growing competition from lower-priced Chinese rivals, several manufacturers are reducing their electrification ambitions.
According to a senior LGES executive who spoke to Reuters in July, demand is expected to rebound in roughly 18 months in Europe and two to three years in the US, depending in part on climate policy and other regulations.
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