LG Energy Solution (LGES) (KRX: 373220) released its financial report for the third quarter of this year on October 28th. The company announced consolidated revenue of 68.778 trillion won (approximately 35.35 billion RMB), a 11.6% increase quarter-on-quarter and a 16.4% decrease year-on-year. Operating profit was 44.83 billion won (approximately 2.31 billion RMB), a 129.5% increase quarter-on-quarter and a 38.7% decrease year-on-year. It is worth mentioning that the operating profit includes an estimated 46.6 billion won (approximately 2.4 billion RMB) in IRA tax credits. Excluding the IRA tax credits, the company would have recorded a quarterly operating loss of 1.77 billion won (approximately 91.15 million RMB).
Chang Sil Lee, Chief Financial Officer of LG Energy Solution, stated that the company's overall revenue increased due to expanded sales to major European automakers, increased production at joint ventures in North America and Indonesia, and a significant increase in revenue from grid-scale energy storage system (ESS) projects compared to the previous quarter.
"We also saw quarter-on-quarter improvements in operating profit excluding the IRA tax credit effect, driven by increased shipments of both EV and ESS batteries, as well as reduced unit cost burden in line with the stabilization of key battery metal prices," said Lee.
The company also achieved growth in customer business in the third quarter, including securing orders from two major electric vehicle manufacturers and strengthening the R&D of large cylindrical batteries and a variety of battery products and production processes with different chemistries.
Secured a Total of 160GWh in Long-Term Orders in Q3
In addition to supplying Tesla, General Motors, and Hyundai Motor, LG Energy Solution successfully obtained large orders totaling 160GWh in battery power from two top global automakers in the middle of this month.
Among them, a 50GWh cylindrical battery supply contract signed with a major automaker will power EVs sold in North America. This deal also allows LGES to expand its customer base for large cylindrical EV batteries from primarily EV startups to established automakers and is expected to strengthen its market presence in North America through local production capabilities.
Furthermore, LG Energy Solution signed a supply agreement totaling 109GWh with another North American automaker, starting from the second half of 2026, to supply power batteries for the automaker's commercial vehicles sold in Europe from its Polish factory.
Diversification of Electric Vehicle (EV) and Energy Storage System (ESS) Business Layout
LG Energy Solution offers a variety of chemical systems and different specifications of products to customers according to the diversified needs of electric vehicle segment applications, such as LFP batteries, mid-nickel high-voltage nickel-manganese-cobalt batteries, and 46-series large cylindrical batteries.
At the same time, the company is also deploying industry-leading battery material technologies and production processes, such as single-crystal cathodes, silicon-based anodes, and dry battery electrode processes, to achieve higher energy density and cost innovation. The company aims to apply dry electrode to mass production by 2028.
In addition, in response to the increasing importance of electric vehicle safety, LG Energy Solution is developing multiple solutions to enhance product safety, including advanced thermal propagation (TP) prevention technology for pouch-type batteries. The company has also completed the development of an optimized cooling module structure for cylindrical batteries.
In the energy storage field, especially grid-scale energy storage, LG Energy Solution is actively securing long-term, large-scale projects in North America, planning to launch high-capacity LFP ESS batteries, as well as advanced energy management and system integration (SI) software. The company will start ESS battery production in the United States next year and consider converting EV production lines to ESS to meet European market demand.
Chief Financial Officer Lee Chang-Sil mentioned the competitive risks faced by the company in the earnings call, "Looking ahead to 2025, we see ongoing macro uncertainty and geopolitical risks, increased exports of batteries by Chinese competitors, as well as plans by automaker customers to manufacture their own batteries, which will intensify competition."
LG Energy Solution's business is highly dependent on the European and American markets. This year, due to factors such as the affordability of electric vehicles, the imperfection of charging infrastructure, tense trade situations, and competitive pressure from China, some European and American automakers are scaling back their electrification goals. Especially in the US market, industry analysts believe that if Donald Trump is elected President of the United States, he may cut electric vehicle tax credits, further slowing the growth of electric vehicles in North America.
According to Reuters, a senior executive of LGES said in July that demand in Europe is likely to recover in about 18 months, while demand in the United States may take two to three years to recover, which also depends on climate policies and other regulations.
LG Energy Solution has also adjusted its mid-to-long-term plan based on business development and the market environment it faces. Overall, it will proactively adjust operations, reduce the scale and speed of capacity expansion, and maximize the utilization rate of existing production lines to reduce capital expenditure; strengthen R&D investment, ensure differentiated materials and process technologies, accelerate R&D to optimize chemical systems and form factor solutions, develop next-generation batteries such as bipolar semi-solid batteries and sulfide-based solid-state batteries; expand the business portfolio, establish regional closed-loop recycling systems, expand BaaS/EaaS businesses, and explore new market opportunities for applications beyond electric vehicles. This aligns with the company's mid-to-long-term strategy released earlier this month.
