Samsung, LG, SK hit by slowed EV sales growth
Korea’s top three battery firms — Samsung SDI, LG Energy Solution, and SK On — have been significantly impacted by slowing electric vehicle (EV) sales growth both domestically and internationally, as demand for EV batteries has decreased following a critical stage in the industry’s development, according to data and industry officials, Wednesday.
Despite experiencing a smaller earnings shock compared to domestic rivals, Samsung SDI reported a 28.8 percent decline in first-quarter operating profit compared to the previous year. The company fared relatively well due to its strong battery sales targeting premium automakers like BMW, which helped defend against further impacts on earnings.
But LG Energy Solution suffered an operating profit decline of 75.2 percent, while SK On widened its deficit between January and March. The SK affiliate reported an operating loss of 331.5 billion won ($238.83 million), mainly due to sluggish sales in North America. It was a substantial increase from the 18.6 billion won loss reported in the previous quarter.
Industry officials attributed the falling revenue of local battery firms to cooling EV industry sentiment.
“The earnings decline was widely expected, as most automakers have slowed down their pace of EV production since the end of last year, with the EV industry entering an early stage of saturation,” an official at an automaker said. “Most carmakers are reshaping their strategy by focusing on sales of hybrid vehicles rather than EVs. As a result, battery firms will need to maintain flexibility in their equipment investment plans until demand for EVs regains vigor.”
According to data from the Korea Automobile & Mobility Association, Korea exported 81,631 EVs in the first quarter, marking a 10.7 percent decline from the previous year. Of particular note was the accelerated decline in EV demand, with exports in March plummeting by 20 percent compared to a year ago.
In response, battery firms decided to revise their investment strategies and take a more flexible approach to the potential change in market conditions.
“We will take proactive measures to anticipate and address any potential market changes,” Lee Chang-sil, chief financial officer of LG Energy Solution, told investors during a recent conference call. “We will maximize the capacity of existing facilities to reduce fixed costs and improve profitability.”
SK On also shared a similar strategy by maintaining flexibility in the timeline of its manufacturing facility expansion.
“We will flexibly manage the timeline for our capacity expansion to respond to any changes in demand from clients,” Kim Jinwon, chief financial officer at SK Innovation, said.