Aerial view of SK Battery America’s Georgia plant, SK On’s U.S. subsidiary (Provided by SK On)
The elimination of U.S. electric vehicle subsidies and the electric vehicle chasm (temporary demand slump) have led to significant losses for LG Energy Solution, Samsung SDI, and SK On in Q4 last year. With North American EV sales down 30%, these companies face challenges from reduced demand and contract cancellations.
According to the securities industry on Jan. 7, LG Energy Solution’s fourth-quarter operating loss consensus (market average estimate) stands at 54.5 billion won (approximately $37.8 million), continuing the loss trend from the same period last year. As recent securities firms’ operating loss estimates have expanded to the 100-200 billion won range, the provisional results to be announced on January 8 are likely to fall short of market expectations.
The situation is more severe for Samsung SDI and SK On. Samsung SDI’s fourth-quarter operating loss is estimated at approximately 279.2 billion won, with some recent securities firms lowering the loss estimates to the 300-400 billion won range.
SK On is also expected to continue losses in the 200 billion won range in the fourth quarter, following its third-quarter operating loss of 124.8 billion won last year. SK On has been unable to escape the quagmire of losses again after recording a temporary profit in the third quarter of 2024.
The primary cause of this earnings shock is attributed to the subsidy policy changes under the U.S. Trump administration. The U.S. government’s abrupt abolition of the electric vehicle purchase tax credit, which reached up to $7,500 per vehicle, as of September 30 last year, has frozen demand in the North American market. According to SNE Research, North American electric vehicle sales plummeted 30% year-on-year in October, immediately after the tax credit abolition.
External conditions are also unfavorable. U.S. automakers including GM and Ford have completely readjusted their electric vehicle production strategies, reducing battery demand. LG Energy Solution’s recent consecutive contract cancellation notifications from Ford and others are part of this trend.
While the battery industry is increasing Energy Storage System (ESS) production to recover from poor performance, the demand slump for electric vehicles, which accounts for a large portion of sales, is painful. An industry insider expressed concern, saying, “Policy support is also diminishing in major markets, making the chasm inevitable to be prolonged.”
