LG Energy Solution (LGES) hopes to benefit from the U.S. Inflation Reduction Act (IRA) and sales of cylindrical batteries to Tesla, as the rechargeable battery maker aims to achieve stellar earnings again this year by increasing investments, particularly in North America.
Announcing a 43 percent year-on-year increase in annual sales to a record 25.6 trillion won ($21 billion) and a 58 percent rise in operating profit to an unprecedented 1.2 trillion won in 2022, LGES said Friday that it aims to expand sales this year by 25 to 30 percent, while continuously improving its operating profit margin.
The LG Group affiliate pointed to rising sales in North America as one of the most important prerequisites to achieving its goal. The company expects the North American battery market to grow over 60 percent this year, leading the overall growth of the global EV battery market.
"Growing demand in the U.S. market will be able to offset sluggish demand in the European market this year," an LGES official said at Friday's conference call on the company's fourth-quarter earnings.
LGES was confident that it will satisfy the requirements specified in the IRA, although it added that a top priority is improving cost competitiveness to brace for possible adjustments to the U.S. law.
The battery maker noted that the IRA will enable it to maintain profitability, amid the risks of rising costs caused by investments in North America.
|LG Energy Solution's (LGES) cylindrical batteries / Courtesy of LGES|
In response to concerns about the impact on battery sales of Tesla's move to cut EV prices, LGES said the U.S. client's decision will have a limited impact, given that cylindrical batteries can also be used by EV startups and electric tools.
Regarding its delayed 1.7 trillion won investment to build a factory in the U.S. state of Arizona, LGES said it is in talks with Tesla and EV startups about their use of cylindrical batteries to be produced at the new factory, although the Korean firm added that it is still deliberating on whether to continue pushing ahead with the factory's construction.
"Based on our strong execution, we will continue to further reinforce our products' competitive advantage and global operating expertise, thereby providing the world's best customer value," LGES CEO Kwon Young-soo said in a press release.