LG Energy Solution, a major South Korean battery manufacturer, announced a larger-than-expected operating loss of 207.8 billion won ($138.1 million) for the first quarter ending March 31, 2026. This figure significantly missed analyst estimates, which projected a 140.5 billion won loss. The company attributed this downturn primarily to a decline in electric vehicle (EV) demand in key markets, especially the US.
The preliminary earnings guidance from LG Energy Solution indicated that revenue would likely fall 2.5% to 6.6 trillion won from the previous year. The reported operating loss includes tax credits provided under the U.S. Inflation Reduction Act for the company's battery production in the United States. Without these credits, the operating loss would have been substantially higher, at 398 billion won, highlighting the impact of government support on their financials.
To counteract the weakness in the EV battery sector, LG Energy Solution is strategically shifting its focus toward the growing energy storage systems (ESS) market. This market is experiencing increased demand due to rising electricity needs, particularly from AI data centers. The company had previously stated its aim to triple its ESS revenue this year from the previous year, with Nomura estimating ESS revenue at approximately 2.8 trillion won in 2025.
The decline in EV demand has affected major customers of LGES, including Tesla, General Motors, and Hyundai Motor, with GM idling an EV plant until April. Analysts like those at Shinhan Investment & Securities have reacted by lowering LGES's target stock price from 600,000 won to 550,000 won. However, potential opportunities might arise from a U.S. House bill, the CHARGE Act, which seeks to ban certain Chinese-made energy storage systems, potentially benefiting South Korean battery makers amidst concerns about remote monitoring capabilities in Chinese products.
