"Electric car dividend" comes to an end! Auto giants withdraw orders, LG's new energy Q1 preliminary performance "disappointing"

LG's preliminary financial report released on Tuesday shows that first-quarter profits were below analysts' expectations. Performance was dragged down by weakened support for electric vehicles in key markets like the United States, with strong demand for Energy Storage Systems (ESS) unable to offset this impact. According to a regulatory filing on Tuesday, the largest battery manufacturer in South Korea recorded a operating loss of 207.8 billion Korean won (approximately $1.381 billion) in the three months ending on March 31. This figure was higher than the analysts' previous estimate of a 140.5 billion Korean won loss. The company stated that without tax credits in the U.S. for advanced manufacturing, the loss would reach 397.5 billion Korean won. Revenue also decreased by 2.5% to 66 trillion Korean won. The final performance will be announced later this month. Prior to the release of the financial report, LG's New Energy stock fell by 1% in Seoul on Tuesday. Nevertheless, the stock has risen nearly 14% in the past month, rebounding from the tumultuous year of 2025, fueled by investor interest in large-scale battery storage triggered by the energy crisis in the Middle East. The setback in the core market of electric vehicle transformation has cast a shadow on South Korean battery manufacturers already facing U.S. tariffs and intense competition from China. In the U.S., President Trump's cancellation of tax credits for electric vehicles and Biden-era fuel economy standards have dealt a heavy blow to car manufacturers. General Motors warned that production-related losses could reach $6 billion; Ford announced $19.5 billion in restructuring costs for its electric vehicle business and canceled a 96 trillion Korean won battery agreement with LG, as well as another joint venture plan with the battery department of SK Innovation. In Europe, Germany's Freudenberg Battery Power Systems recently exited the battery industry, canceling a 39 trillion Korean won agreement with LG. Facing the uncertain outlook for electric vehicles, LG New Energy is actively shifting its production capacity towards Energy Storage Systems (ESS), with AI-driven data centers becoming a new revenue growth point. The company is converting multiple electric vehicle production lines to ESS battery production lines, planning to increase capacity from 36 gigawatt hours (GWh) to at least 60 GWh, and striving to secure at least 90 GWh in new orders this year. Jin-soo Park, an analyst at New Glory Securities, stated that while the cooling demand for electric vehicles and other downside risks were already reflected in the first-quarter expectations, LG's operating profit margin is expected to significantly improve with the prosperity of ESS. In a briefing before the release of the preliminary financial report on Tuesday, Jin-soo Park wrote, "The first quarter is expected to be the bottom of the cycle," adding that LG's early advantage in North America and clear revenue growth will revive the momentum for new contracts.