In This Article:
(Bloomberg) -- Battery maker LG Energy Solution Ltd. said it will make major cuts to spending this year, though it expects a rebound in sales, as major uncertainties hang over the global electric vehicle sector.
Most Read from Bloomberg
-
Billionaire Developer Caruso Slams LA Leadership Over Wildfires
-
How Sanctuary Cities Are Preparing for Another Showdown With Trump
-
Hoboken PATH Station Will Close for Almost a Month on Jan. 30
The supplier to automakers including General Motors Co., Tesla Inc. and Volkswagen AG will reduce capital expenditure by 20% to 30%, it said in a filing on Friday. LG Energy confirmed a surprise 225.5 billion won ($157 million) operating loss for the three months ended Dec. 31. The result includes 377.3 billion won of tax credits from the US.
Still, LG Energy expects to see sales increase 5% to 10% this year as new assembly lines at North American plants jointly run with Honda Motor Co. and Stellantis NV start up. The company is also looking to start selling new products, including a next generation 46-millimeter cylindrical battery, Chief Financial Officer Lee Chang-sil said.
Click here to see details on LG’s final results
The mixed outlook from the world’s third-biggest EV battery supplier signals ongoing turbulence for the sector as demand slows. GM is shutting down its self-driving vehicle business, months after it scaled back its EV production goals. Meanwhile, European auto giants have seen sales in China soften and are struggling with stagnating consumer interest at home. VW has no new EV models to roll out this year, threatening to extend its sales slump, while BMW AG and Mercedes-Benz Group AG are shuffling their leadership teams.
The future of energy policy in the US is a major uncertainty for LG. The company currently receives tax credits under the Inflation Reduction Act, which is pushing to reduce US dependence on China in the EV supply chain. But President Donald Trump has ordered the elimination of subsidies and policies that favor EVs.
The US is likely to reduce or revoke the existing $7,500 EV subsidy and automakers appear to be taking a “conservative approach” due to remarks from the new Trump administration around policy changes, Lee said on a call. In the short term, LG will focus on investment efficiency, including cutting capex and focusing on existing plants rather than building new ones, he said.
While it’s not easy for Trump to revise the IRA, he can change some guidance in the law without the need for Congressional approval, Jamin Koo, a New York-based attorney at Covington, said last week. Trump may demand that battery makers reduce the use of critical minerals from so-called foreign entities of concern in their supply chains more than the Biden administration did, he said.