A Quarterly Loss of 841.6 Billion Korean Won! Why Have the Performances of the Three Major Korean Battery Giants Collapsed?

Recently, the three major Korean battery giants released their Q4 2024 financial reports. Data shows that SK On, Samsung SDI, and LGES collectively recorded an operating loss of 841.6 billion won during the quarter.

Among them, SK On's Q4 2024 operating loss reached 359.4 billion won, a sharp increase of nearly 340 billion won compared to the 18.6 billion won loss in the same period of 2023, bringing SK On's total loss for 2024 to 1.127 trillion won.

In Q4 2024, Samsung SDI reported a loss of 256.7 billion won, compared to a profit of 295 billion won in the same period last year, marking a shift from profit to loss. This was mainly due to a decline in capacity utilisation rate, increased fixed costs from new factories, and one-time expenses. Specifically, Samsung SDI's battery business recorded a loss of 268.3 billion won in Q4 2024.

For the full year 2024, Samsung SDI's operating profit was 363 billion won, down 76% YoY.

LGES recorded an operating loss of 225.5 billion won in Q4 2024, compared to an operating profit of 338.2 billion won in the same period last year. Benefiting from the US Inflation Reduction Act, LGES received a tax credit of 377.3 billion won (approximately 1.9 billion yuan) in Q4 2024. Excluding the US tax credit, the actual operating loss would have been higher.

Notably, this marks LGES's first quarterly loss in three years, primarily due to a slowdown in EV demand.

For the full year 2024, LGES's operating profit was 575.4 billion won, down 73.4% YoY.

Overall, the three major Korean battery giants all reported losses in Q4 2024, mainly due to weak demand in European and US markets and policy impacts. Companies like Tesla and General Motors lowered their sales targets and adjusted inventories, leading to a decline in battery shipments. This was compounded by delays in transitioning to LFP batteries and increased costs from new factory construction.

Regarding power battery installations, research firm EVTank reported that in 2024, Korea's LGES ranked third globally, with power battery shipments nearing 120 GWh. Its top five clients were Volkswagen, Tesla, General Motors, Hyundai, and Volvo. SK On and Samsung SDI ranked fifth and seventh, respectively.

According to data from Korean research firm SNE Research, in 2024, LGES and SK On both achieved growth in battery installations, while Samsung SDI saw a 10.6% YoY decline. The three companies collectively recorded 164.9 GWh in installations, with a market share of 18.5%. Analysts attributed Samsung SDI's decline mainly to reduced battery demand from major automakers in Europe and North America.

Specifically, LGES maintained its global third-place position with installations of 96.3 GWh, up 1.3% YoY, and a market share of 10.8%. SK On ranked fifth with 39 GWh, up 12.4% YoY, and a market share of 4.4%. Samsung SDI ranked seventh with 29.6 GWh, down 10.6% YoY, and a market share of 3.3%.

Industry insiders believe that in the short term, Korean battery companies will continue to face multiple pressures, including US policy uncertainties, low-cost competition from China, and weak demand. However, if they can achieve breakthroughs in technology, optimise supply chains, and strengthen customer relationships, they are expected to gradually regain competitiveness after 2025.

Additionally, recent reports suggest that the Korean government and parliament are considering a plan to directly compensate companies building battery production facilities in Korea with cash. According to Korean battery industry insiders, the "Second Battery Forum" in parliament, composed of multiple lawmakers, unanimously agreed that to prevent the hollowing out of the battery industry, factory investment funds need to be directly reimbursed, and they decided to propose related legislation soon. If implemented, this plan would help slow the "de-Koreanisation" trend in the battery industry.

Korean media analysis indicates that in the investment plans of LG Energy Solution, Samsung SDI, and SK On for the next three years (2025–2027), 96.3% of new and expansion projects will be overseas, with only 3.7% of capacity remaining domestic. This means approximately 66 trillion won in investments and 57,000 jobs will leave Korea.

Battery Network noted that recently, the three major Korean battery giants have all announced significant moves, with mixed outcomes.

Samsung Battery Defects Lead to Recall of 180,000 Vehicles

On February 8, Samsung announced a large-scale recall involving 180,196 vehicles from Ford, Audi, and Stellantis due to risks of battery pack defects that could cause fires.

Stellantis was the most affected, with 155,096 vehicles involved, including 2020–2024 Jeep Wrangler 4xe and 2022–2024 Jeep Grand Cherokee 4xe models.

The US National Highway Traffic Safety Administration (NHTSA) pointed out that the separators in the battery cells might be damaged, which, combined with other internal factors, could lead to fires.

Affected Ford models include the 2020–2024 Ford Escape and 2021–2024 Lincoln Corsair, with issues also related to damaged battery cell separators.

Volkswagen and Samsung did not specify the exact issues with Volkswagen-brand vehicles, which include the 2022 A7 and 2022–2023 Q5 models, but noted potential risks of smoke or fire due to thermal overload.

SK On Completes Three-Way Merger

On February 1, SK On announced the completion of a three-way merger, officially launching as a "Global Battery and Trading Company" after merging with SK Enterm and finalising the three-way merger disclosed in July last year. The newly merged entity will operate under the SK On name.

SK Enterm, Korea's largest commercial tank terminal operator, will continue to operate as part of SK On Trading International after the merger.

Through this merger, SK On aims to enhance its core competitiveness in the battery business by strengthening raw material procurement capabilities and financial stability.

SK On also mentioned that the merger is expected to improve its profit structure. As of the end of 2023, SK On's revenue and assets were valued at 13 trillion won and 33 trillion won, respectively, but are expected to increase to 62 trillion won and 40 trillion won post-merger. SK On anticipates that the merger will boost EBITDA by approximately 500 billion won. The merged entity is expected to be less sensitive to external market fluctuations and have limited capital expenditures, thereby generating stable profits.

LGES China Headquarters Officially Established in Nanjing, Jiangsu

On January 22, LG Energy Solution (China) Co., Ltd. completed its business registration. Located in Nanjing, Jiangsu Province, the company is represented by CHOI JI WOONG, with a registered capital of $10 million. Its business scope includes new material technology R&D, corporate headquarters management, and information consulting services. The company is wholly owned by LGES Corporation.

The establishment of LG Energy Solution (China) Co., Ltd. marks the official launch of LGES's China headquarters. The headquarters will oversee accounting, taxation, legal, logistics, and procurement operations for LGES's subsidiaries in China, manage cross-border cash pools, conduct R&D on new energy batteries and materials, and handle upstream and downstream industry chain investments.

According to the Nanjing Economic and Technological Development Zone, on December 22, LGES Corporation officially announced that its China headquarters would be located in the Nanjing Economic and Technological Development Zone. This is the 10th company LG Group has established in the zone.