With projections for electric car sales being affected by global economic concerns, South Korean battery company LG Energy Solution (LGES) cautioned on Wednesday that revenue growth will slow down in 2024. This warning caused its shares to drop by about 7%.

It joins an increasing number of automakers and suppliers who are wary about the demand for electric vehicles (EVs). They worry that rising interest rates will increase the cost of financing and that the sluggish growth of key economies like Europe and China would affect consumer behaviour.

“EV demand next year could be lower than expectations,” LGES Chief Financial Officer Lee Chang-sil said on an earnings call, citing those factors, as well as automakers adjusting their EV strategies in response.

Tesla, General Motors, and other automakers’ supplier, LGES, predicted that sales growth in 2024 will fall short of this year’s mid-30% rate.

LGES Vice President Kim Gyunghoon stated during the call that a rebound in demand from European manufacturers is probably going to be delayed as Chinese competitors introduce less expensive EVs in the area. Kim continued, “LGES is responding by reducing production at its Poland factory in order to minimise costs.”

In the US, General Motors (GM), a joint venture partner in two battery plants being built and one in Ohio, announced on Tuesday that it was delaying the introduction of multiple electric vehicle (EV) models to reduce expenses and reducing its investment in EV products to prioritise profitability over sales goals.

Comparing LGES shares to the benchmark KOSPI, which fell by 0.6%, the latter fell by as much as 6.69% to reach its lowest point in over a year.

Hyundai Motor Securities analyst Kang Dong-jin stated that although LGES shares had already declined due to GM’s bad news prior to the earnings announcement, they continued to decline during the earnings call due to the less optimistic outlook.

LGES said that it was increasing the production capacity of its fully-owned battery factory in Arizona to 36 gigawatt hours (GWh) from 27 GWh, defying expectations that the growth in demand is slowing. The move was made in order to capitalise on tax incentives available for manufacturing in the United States.

LGES further stated that it intended to begin production in late 2025 on energy-dense 46-series cylindrical battery cells with a higher driving range at its Arizona factory.

The business also said that, in an effort to better meet consumer demand for less expensive EVs, it would start producing cheaper lithium iron phosphate (LFP) batteries in 2026.

Thanks in part to higher output from its Ohio joint venture facility with GM, LGES reported a 40% increase in third-quarter earnings to 731 billion won ($543.46 million), in line with the company’s earlier expectations.

Revenue for the September quarter increased 7.5% yearly to 8.2 trillion won, according to LGES. However, it was 6% lower than the June quarter as a result of the European market slowdown, automakers’ production changes, and falling metal costs.

(Adapted from USNews.com)