South Korea's leading electric vehicle (EV) battery manufacturers have reported significant declines in revenue and profits for the second quarter of 2024, primarily due to a slowdown in EV demand in North America and Europe. This downturn has forced major players in the industry to reassess their strategies and operations.
LG Energy Solution, South Korea's largest battery supplier, saw a 30% decrease in sales to 6.16 trillion won in the second quarter. The company's operating profit plummeted by 75.2% year-over-year to 157.3 billion won. Similarly, SK On, another major battery producer, recorded a 58% drop in sales compared to the same period last year.
Samsung SDI also experienced a decline, with its battery sector profit falling by 28.8% to 267.4 billion won. SK On reported an operating loss of 315.5 billion won, marking its ninth consecutive quarterly loss.
The slowdown in EV demand has led automakers to reduce battery orders, resulting in lower production volumes and profitability for battery manufacturers. While these companies receive compensation from automakers for reduced orders, the fixed costs of factory operations continue to be a significant burden.
Industry experts attribute this downturn to several factors, including inventory adjustments by automakers and a general slowdown in the EV market. The decline in lithium and other metal prices is also expected to continue squeezing profitability until the second quarter.
Despite the current challenges, South Korean battery makers remain optimistic about a recovery in the latter half of the year. They anticipate improved conditions as inventory adjustments conclude and new car models are launched. Companies like LG Energy Solution and Samsung SDI are adapting their strategies, focusing on maintaining profitability through product lineup expansions and flexible operations.
This situation highlights the volatile nature of the EV market and the need for battery manufacturers to remain agile in response to changing demand patterns. As the industry navigates these challenges, the coming months will be crucial in determining the trajectory of South Korea's battery sector and its position in the global EV supply chain.
