By Kwanwoo Jun
South Korean battery shares slumped Wednesday on downbeat quarterly earnings and a tougher outlook for the electric-vehicle industry.
Shares of EV-battery maker LG Energy Solution and Posco Future M, a supplier of battery materials, both plunged over 7% to lead the selloff, underperforming the benchmark Kospi’s 0.4% fall in afternoon trade.
The declines came after LG Energy on Wednesday posted earnings for the third quarter ended September. Though net profit more than doubled on year to 420.50 billion won ($312.8 million), it missed a FactSet-compiled consensus forecast of KRW526.68 billion.
Posco Future M’s net profit also missed a FactSet-compiled consensus forecast, dropping 65% on the year to KRW23.16 billion during the September quarter versus the expected KRW35.05 billion.
Adding to the downbeat mood was General Motors’ post-earnings announcement that it is abandoning its target to build 400,000 EVs by mid-2024.
Reduced EV production from the U.S. auto maker inevitably would affect LG Energy, a key battery supplier and joint-venture partner for GM. This in turn would also affects Posco Future, which supplies cathode and other materials to LG Energy and other EV battery makers.
Though EV sales in the U.S. are still growing, the pace has slowed. Carmakers like Ford and Tesla are cutting prices and offering discounts to draw interest, eating into their profitability.
In a post-earnings call, LG Energy said it sees a possible slowdown in EV demand next year, noting already-high penetration in China and decelerating demand growth in Europe. It said consumer sentiment has been dampened by slowing growth and high rates, and that its revenue growth next year is not likely to be as brisk as this year.
South Korean battery companies are also facing challenges from a planned shift by GM and possibly other EV makers to a cheaper, cost-saving battery based on lithium iron phosphate. The production of these batteries, known as LFPs, is currently dominated by Chinese players, Citigroup analyst Oscar Yee said in a research note.
South Korean companies meanwhile dominate the market for the premium and more expensive NCM batteries based on nickel cobalt and manganese.
LG Energy said in the call that it is rushing to develop LFP batteries and aims to launch its own LFP products from 2026.
Write to Kwanwoo Jun at [email protected]
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