LG Energy Solutions' Q3 report reveals a strategic shift to the mid-to-low end NEV market amid global economic pressures

Recently, LG Energy Solutions released their Q3 report, detailing their Q3 performance and future technology roadmap. In Q3 2023, LG Energy Solutions achieved revenues of approximately 8.2 trillion Korean Won, up 6% QoQ. After deducting IRA tax offsets, operating profits still saw a growth, reaching 515.7 billion Korean Won, up 37% QoQ, with a net profit margin of 5.1%.

In terms of revenue:

In Q3 2023, LG Energy Solutions achieved revenues of approximately 8.2 trillion Korean Won, down 6% QoQ. Despite LG's active response to the incremental production of the joint venture company in the North American market, their revenues still declined due to the following factors:

1) A slowdown in demand from Europe

2) Product adjustments by manufacturers of new energy vehicles

3) The decline in metal prices in the first half of the year, which affected the selling price of products in this quarter.

Additionally, LG indicated that it is targeting the mid-to-low-end market with its recent business strategy, seeking new growth points in niche markets through medium-nickel high voltage and LFP entry. LG's LFP batteries began production in the company's Chinese production line in the third quarter of 2023. The 46 series products will start production in the Korean factory in the second half of 2024.

In the high-end automobile market, the top priority is to enhance energy density.

The mid-to-low-end automobile market has become a new strategic focus: introducing medium-nickel high voltage and LFP products.

Facing slowing global economic growth, high interest rates, and falling consumer confidence, LG Energy Solution forecasts a bleak outlook for Q4 and 2024.

North American market: The pace of electrification may slow down due to political situations related to the 2024 presidential election;

European market: The demand for EVs is expected to remain weak, with eco-friendly policies possibly being delayed. LG stated that its European customers' vehicle sales are below expectations, production will be adjusted, and declining metal prices lead to lower battery prices, causing vehicle manufacturers to delay purchases. Moreover, European local markets are unable to compete with the influx of low-priced electric vehicles from China.

Chinese market: As China has a high market penetration rate, its growth pace is expected to slow down.

Faced with this macro environment, LG has stated that they will drive continuous growth by enhancing product competitiveness, establishing a stable raw material structure, developing next-generation batteries (such as solid-state and lithium-sulfur batteries), and implementing smart factories.