(C) Digitimes

SEOUL – The South Korean battery industry is reeling from the sudden elimination of electric vehicle (EV) subsidies in the United States, with all three major domestic players—LG Energy Solution (LGES), Samsung SDI, and SK On—reporting or bracing for significant operating losses.

The End of an Era for LG Energy Solution
LG Energy Solution, which had previously stood as the industry’s top performer, reported a preliminary operating loss of 122 billion KRW for the fourth quarter of last year. This marks a stark reversal from the company’s robust growth earlier in 2024, where it posted operating profits of 374.7 billion KRW in Q1, 492.2 billion KRW in Q2, and 601.3 billion KRW in Q3.

The primary driver behind this downturn is the sharp decline in Advanced Manufacturing Production Credit (AMPC) benefits under the U.S. Inflation Reduction Act (IRA). While LGES had collected over 1.3 trillion KRW in AMPC during the first three quarters, the Q4 credit dropped to 332.8 billion KRW. Excluding these tax credits, the company’s actual operating loss for the quarter reached a staggering 454.8 billion KRW.

Ripple Effects Across the Big Three
The crisis is not limited to LGES. According to financial market tracker FnGuide, the outlook for Samsung SDI and SK On is equally grim:

Samsung SDI: Expected to post an operating loss of 287.4 billion KRW for Q4. This would mark its sixth consecutive quarter in the red, although the scale of the loss is projected to be the smallest of the year.
SK On: Forecast to record a Q4 loss of approximately 2900 billion KRW. This exceeds the company's previous worst-performing quarter (Q1) and brings its estimated total annual deficit to roughly 370.0 billion KRW.

Trump Administration Policy Shake-up
The industry’s decline is directly linked to the Trump administration’s decision to abolish EV subsidies as of late September last year. In response, U.S. automakers have aggressively scaled back their EV production strategies.

Notably, Ford recently terminated a 9.6 trillion KRW contract with LGES and is reportedly moving toward disbanding BlueOval SK, its joint venture with SK On.

Pivot to Energy Storage Systems (ESS)
Faced with a cooling EV market, South Korean battery manufacturers are now pivoting toward the Energy Storage System (ESS) sector to offset losses.

"Beyond the slowdown in EV demand, companies are incurring significant costs as they transition production lines to cater to ESS," an industry official noted. "For the coming year, we expect a strategic shift to focus heavily on meeting the rising demand for ESS in the American market."

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