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deal! LG Chemical will formally spin off the battery business in December
Sep 17,2020 16:24CST
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SMM: according to reports, on Sept. 17, South Korea's LG Chemical said that with the vigorous development of the electric vehicle market, the company plans to split its battery business into an independent new company in December this year, aiming to strengthen its expertise and market dominance by focusing on the battery business.

The new company, wholly owned by LG Chemical and tentatively named LG Energy Solutions (LG Energy Solutions), which covers automotive batteries, energy storage systems and small batteries for smartphones and laptops, aims to generate 30 trillion won ($25.5 billion) or more in revenue by 2024, compared with an expected 13 trillion won this year. LG Chemical also revealed that it is considering listing its battery business, but did not elaborate further. LG Chemical shares rose 5.4 per cent on the news.

LG Chemical has long been betting that car batteries will be the new engine of growth, but its battery business has never made an annual profit since it began running the business a decade ago. Expectations for LG's chemical battery business are rising as carmakers launch an electrified offensive with the rise of Tesla and stricter emissions regulations in Europe.

In the second quarter of this year, LG Chemical's car battery business was profitable. LG Chemical expects its battery business to become more profitable, thanks to growing battery demand from European carmakers and increased sales of cylindrical batteries used by Tesla.

LG Chemical says now is the right time to spin off its battery business as it has begun to make structural profits in its car battery business. In addition, breaking up the battery business into separate companies also helps to attract new investment. Due to the increasing number of orders, the business needs a large amount of capital expenditure to expand production capacity. It is understood that LG Chemical's investment in batteries has so far exceeded 10 trillion won. This year, the company expects total capital expenditure to reach 6 trillion won, half of which will be spent on batteries.

LG Chemical has production bases in South Korea, the United States, China, Europe and other places, and its customers include Hyundai Kia, Tesla, GM, Ford, Chrysler, Volkswagen, Audi, Daimler, Renault, Volvo, Jaguar and other automakers.

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