LG Energy Solution Targets ESS for Rebound After Q2 Losses

LG Energy Solution has recorded losses for the second consecutive quarter, impacted by the slowdown in the electric vehicle market and a reduction in U.S. tax credit benefits. The company posted an operating loss of 207.8 billion won on a consolidated basis in the first quarter of this year, a stark contrast to an operating profit of 374.7 billion won in the same period last year.

Key factors contributing to the poor performance include the reduction in the Advanced Manufacturing Production Credit (AMPC) under the U.S. Inflation Reduction Act (IRA), which fell from 457.7 billion won in the previous year's period to 189.8 billion won. In addition, initial investment costs for expanding North American ESS production bases and changes in product mix due to a decrease in electric vehicle pouch cell shipments to major North American clients have collectively contributed to the situation.

Industry observers anticipate that LG Energy Solution will hit a low point in the first half of this year, with performance expected to recover from the second half onwards. Analysis suggests that the rapidly growing demand for Energy Storage Systems (ESS), driven by the expansion of AI-based data centers and increased power grid investments, will be a key driver for performance improvement.

The company is pursuing performance improvements by expanding its ESS business, particularly in the North American market. LG Energy Solution currently operates five ESS production networks in North America and aims to more than triple its ESS revenue. The company is also accelerating its business structure reorganization, with plans to increase the proportion of ESS and new businesses from approximately 20% to the mid-40s, and to expand its global ESS production capacity to over 60 GWh by the end of this year.