(Bloomberg) — Battery maker LG Energy Solution Ltd. said it can make major cuts to spending this yr, though it expects a rebound in sales, as major uncertainties hang over the worldwide electric vehicle sector.
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The supplier to automakers including General Motors Co., Tesla Inc. and Volkswagen AG will reduce capital expenditure by 20% to 30%, it said in a filing on Friday. LG Energy confirmed a surprise 225.5 billion won ($157 million) operating loss for the three months ended Dec. 31. The result includes 377.3 billion won of tax credits from the US.
Still, LG Energy expects to see sales increase 5% to 10% this yr as recent assembly lines at North American plants jointly run with Honda Motor Co. and Stellantis NV initiate. The corporate can also be seeking to start selling recent products, including a next generation 46-millimeter cylindrical battery, Chief Financial Officer Lee Chang-sil said.
Click here to see details on LG’s final results
The mixed outlook from the world’s third-biggest EV battery supplier signals ongoing turbulence for the sector as demand slows. GM is shutting down its self-driving vehicle business, months after it scaled back its EV production goals. Meanwhile, European auto giants have seen sales in China soften and are battling stagnating consumer interest at home. VW has no recent EV models to roll out this yr, threatening to increase its sales slump, while BMW AG and Mercedes-Benz Group AG are shuffling their leadership teams.
The long run of energy policy within the US is a serious uncertainty for LG. The corporate currently receives tax credits under the Inflation Reduction Act, which is pushing to cut back US dependence on China within the EV supply chain. But President Donald Trump has ordered the elimination of subsidies and policies that favor EVs.
The US is probably going to cut back or revoke the present $7,500 EV subsidy and automakers look like taking a “conservative approach” as a consequence of remarks from the brand new Trump administration around policy changes, Lee said on a call. Within the short term, LG will deal with investment efficiency, including cutting capex and specializing in existing plants fairly than constructing recent ones, he said.
While it’s difficult for Trump to revise the IRA, he can change some guidance within the law without the necessity for Congressional approval, Jamin Koo, a Recent York-based attorney at Covington, said last week. Trump may demand that battery makers reduce the usage of critical minerals from so-called foreign entities of concern of their supply chains greater than the Biden administration did, he said.