Volkswagen scandal boosts LG Chem, Samsung SDI
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By Kim Yoo-chul
Volkswagen’s emissions cheating scandal is benefitting LG Chem and Samsung SDI, the world’s leading car battery suppliers, as leading car makers plan to accelerate the release of more electric vehicles (EVs).
“The Volkswagen scandal will help carmakers strengthen their EV portfolio and promote marketing, a clear positive sign for LG Chem and Samsung SDI,” Lee Seung-hyuck, an analyst at Korea Investment, said.
LG Chem shares rose 0.75 percent to end at 268,000 won on the nation’s main bourse, Thursday, extending its winning streak since Sept. 22 as the scandal may lift the sale of LG Chem’s EV batteries.
The company is the world’s top battery supplier for EVs. It runs massive factories in the United States and Korea, and the LG Group affiliate is working on building new battery lines in China under the direct control of its battery chief, Kwon Young-soo.
Volkswagen admitted this week that 11 million of its vehicles globally, including nearly 500,000 in the United States, were involved in a deception that allowed the vehicles to pass emission tests while emitting nitrogen oxide at up to 40 times the federal standard. The discovery prompted its CEO to resign.
Meritz Securities, another local brokerage, revised up its target on Samsung SDI to 135,000 won and maintained a “buy” rating on the stock.
“Demand for EVs will clearly rise,” Ji Mook-hyun, from Meritz, said in a note to clients. “Amid tightening control by governments for greenhouse gases, the Volkswagen event will fuel huge momentum for the EV industry.”
Ji said carmakers are increasingly worried about penalties from governments in the United States and Europe if they fail to meet emission standards. “Car manufacturers will spend more for EV projects,” the analyst said.
Ji said the brokerage expects Samsung SDI to exceed 1 trillion won in sales from the car battery business in 2016.
Samsung SDI shares closed at 104,000 won, Thursday, up 1.96 percent from the previous trading session. SDI also extended its winning streak for three days since Sept. 22, according to data from the Korea Exchange (KRX).
Samsung SDI is challenging LG Chem in the car battery business. LG is still the frontrunner ahead of the Samsung unit in terms of the number of clients and annual sales, but Samsung SDI is quickly catching up.