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Electric battery giant LG’s power solution sees demand surge as chip shortage eases

Battery maker LG Energy Solution Ltd (LGES) said on Tuesday it aims to increase sales by around 8% in 2022, anticipating a recovery in demand for electric vehicle (EV) batteries as the global shortage of fleas will subside later this year. The newly listed South Korean company, which accounts for a fifth of the global electric vehicle battery market, posted profits in the October-December quarter even as chip shortages affecting automakers drove demand for batteries lower than expected.

LGES, which last month became South Korea’s second-largest listed company in the country’s largest IPO, posted an operating profit of 76 billion won ($63.5 million ) for the fourth quarter, it said in its first earnings report. That compares with a profit estimate of 150 billion won by two analysts polled by Refinitiv and a loss of 479 billion won in the same period a year earlier.

Analysts noted that the global chip shortage had affected demand from automakers, with LGES rivals SK On and Samsung SDI Co Ltd reporting a similar impact on battery demand in the fourth quarter.

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LGES became South Korea’s second-largest listed company last month in the country’s biggest IPO.

Revenue for LGES, which supplies Tesla Inc and General Motors Co among others, rose 2% to 4.4 trillion won from a year earlier. The company said it set this year’s capital expenditure budget at 6.3 trillion won, up 58% from the previous year, to fund capacity expansion at its global manufacturing facilities. in order to meet the demand for batteries.

“LGES will continue to move forward with bold investment plans needed for the long term. We are confident that our future-ready business model will definitely help us lead the industry,” said the CEO of LGES. LGES, Youngsoo Kwon, in a statement.

LGES made a spectacular market debut in late January, reaching a market capitalization of around $98 billion, second only to Samsung Electronics Co Ltd on the local stock exchange, reflecting an optimistic outlook for the electric vehicle battery industry. Shares of the company have since risen 8.5% and added another 2.2% on Tuesday, before rising 0.8% in the broader KOSPI market. Asked on a conference call with analysts about other battery joint ventures with automakers, LGES said it had had working-level discussions with Japan’s Honda Motor Co Ltd about a possible joint venture, but that there was no concrete agreement on a deal.

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Revenue for LGES, which supplies Tesla Inc and General Motors Co among others, rose 2% to 4.4 trillion won from a year earlier

In January, a local South Korean newspaper reported that LGES planned to form a battery joint venture with Honda in the United States. LGES said in late January that it plans to invest a total of $2.6 billion with GM to build their third joint battery plant in the United States, aiming to secure an annual capacity of around 50 gigawatt hours (GWh). batteries by 2025, enough to power about 700,000 EVs. The two companies are already building two joint battery factories in Ohio and Tennessee.

Global electric vehicle sales, estimated at 2.5 million vehicles in 2020, are expected to increase more than 12 times to reach 31.1 million by 2030 and account for nearly a third of new vehicle sales, according to the Deloitte consulting firm.

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