LGES aims to triple EV battery sales in 5 years

LG Chem to supply battery material to GM until 2030

By Park Jae-hyuk

LG Energy Solution (LGES) seeks to triple its annual revenue and achieve a double-digit operating profit margin within the next five years, aiming to post 22 trillion won ($16.7 billion) in sales this year, the company said, Wednesday.

The electric vehicle (EV) battery manufacturing unit of LG Group also plans to focus more on the fast-growing North American market, while adding a cylindrical battery production base in the European market.

“We will triple our revenue in five years through joint ventures and OEMs in North America, scaling up the supply of cylindrical batteries, developing a new form factor and discovering new business opportunities,” an LGES official said. “We also aim to achieve a double-digit operating profit margin by obtaining technological leadership with differentiated materials and processes.”

These strategies were disclosed during Wednesday's conference call on its second-quarter earnings.

Although its quarterly revenue dropped 1.2 percent year-on-year to 5 trillion won, and its operating profit plunged 73 percent to 195.6 billion won, LGES was confident of achieving its long-term goals.

“This quarter's profitability has shown a moderate drop, mainly due to the impacts from lockdown measures in China, global supply chain disruptions and a belated hike in our product prices after the rise in raw material costs,” LGES chief financial officer Lee Chang-sil said.

The battery maker expects its second-half revenue to reach 12.6 trillion won, up 48 percent from the previous year, as demand from carmakers will increase and Ultium Cells, its joint venture with General Motors (GM), will begin its phase 1 operations of the Ohio plant.

“Our ultimate goal is to provide the world-best QCD (quality, cost and delivery) to our customers, thereby becoming the number one company in terms of profitability ― loved and trusted by our customers,” LGES CEO Kwon Young-soo said in a statement. “Going forward, we will continue to secure technological leadership and reinforce our product competitiveness.”

Its parent firm, LG Chem, announced the same day that its second-quarter revenue rose 7 percent year-on-year to 12.2 trillion won and its operating profit dropped 59 percent to 878.5 billion won.

LG Chem also said it has signed a binding agreement with GM to supply cathode active material for Ultium Cells. Through this long-term supply arrangement, the Korean firm will supply more than 950,000 tons of EV battery material to the U.S. carmaker until 2030, starting from the second half of this year.

“Based upon close collaboration with customers, LG Chem will further strengthen its position as a global leader in the market by producing the world's best cathode materials,” LG Chem CEO Shin Hak-cheol said.

GM Vice President Jeff Morrison said, “This agreement builds on GM's commitment to creating a strong, sustainable battery raw material supply chain to support our fast-growing EV production needs.”