Profit Soars 152% Yet Stock Price Falls 2.3%: How LG Energy Squeezes Out the "Water" from Financial Reports

Recently, South Korean battery manufacturer LG Energy Solution announced its financial report for the second quarter of 2025.

The data shows that during the reporting period, the company's consolidated revenue was 5.6 trillion KRW, a quarter-on-quarter decrease of 11.2%; however, operating profit surged 152.4% year-on-year and increased 31.4% quarter-on-quarter, reaching 492.2 billion KRW (approximately 360 million USD), significantly higher than 195 billion KRW in the same period last year; the operating profit margin reached 8.8%.

This result far exceeds market expectations.

It is worth noting that excluding the tax credits received under the U.S. Inflation Reduction Act (approximately 490.8 billion KRW), LG Energy Solution's operating profit would be 1.4 billion KRW; consolidated revenue was 5.565 trillion KRW, down 9.7% year-on-year and 11.2% quarter-on-quarter; net profit reached 91 billion KRW, compared to a net loss of 24 billion KRW in the same period last year.

In stark contrast to this impressive financial report, LG Energy Solution's stock price once fell by 2.3% on the day the report was released.

This abnormal phenomenon of "critical acclaim without commercial success" has prompted the capital market to question the sustainability of its performance.

A deep analysis of this financial report reveals that the significant profit growth of LG Energy Solution is largely reliant on a "buying spree" triggered by anticipated U.S. tariffs. North American customers have been increasing their purchase volumes in advance to avoid potentially high tariffs, and this short-term demand overdraft has brought substantial profits to LG Energy Solution.

However, when the policy dividends fade and the market returns to normal, LG New Energy will have to face the test of real market demand. So, how long can this short-term prosperity driven by policy last? And how should LG New Energy respond to the upcoming challenges?

Manufacturers stock up, residual effects of tariffs remain.

LG Energy Solution candidly stated that the more than doubling of operating profit in the second quarter was partly due to some customers stockpiling batteries before potential U.S. tariffs took effect, thereby fulfilling demand ahead of time.

A company spokesperson stated, "In addition to our cost-cutting efforts, we have increased shipments of battery products to American customers such as Hyundai, Kia, and General Motors, thereby boosting quarterly profits."

The anticipated battery import tariff policy previously proposed by the U.S. government has stirred significant ripples in the new energy battery industry, akin to a boulder thrown into the market. For LG Energy Solution, the direct impact of this policy expectation is that the procurement volume from North American customers saw an unusual increase in the second quarter.

After all, the North American market has always been an important growth factor for LG Energy Solution.

In January this year, LG Energy Solution announced that it had signed a seven-year battery supply agreement with the American electric vehicle startup Aptera Motors Corp. In a press release, LG Energy Solution stated that the company, along with Aptera Motors and Korean battery pack manufacturer CTNS, signed a tripartite agreement to supply a total of 4.4 GWh of cylindrical batteries to the American company from 2025 to 2031.

In addition to Aptera, LG Energy Solution is also collaborating with the American startup automaker Rivian. In November 2024, LG Energy Solution announced that its wholly-owned subsidiary, LG Energy Solution Arizona, signed a supply agreement with the American automobile manufacturer Rivian.

According to the agreement, LG Energy Solution will supply Rivian with a total of 67 gigawatt-hours (GWh) of 4695 cylindrical batteries over five years. In the first year of production, the 4695 cylindrical batteries will be manufactured at LG Energy Solution’s independent plant in Arizona and shipped to Rivian’s factory in Normal, Illinois, for use in Rivian’s R2 models targeting the North American market.

It is worth mentioning that in May this year, according to foreign media citing informed sources, Rivian had stockpiled a large number of electric vehicle batteries from Asia before U.S. President Trump imposed additional tariffs.

Image source: LG Energy Solution

In addition, LG Energy Solution maintains close cooperation with Tesla and deepens its collaboration with established automakers such as General Motors and Ford in the United States.

For example, in October 2024, LG Energy Solution signed a supply agreement with Ford Motor Company to provide batteries for Ford's electric commercial vehicles sold in the European market, with a total supply volume of 109 GWh. According to LG Energy Solution, the supply plan will be implemented starting in 2026, and the contract term is four to six years. The two parties did not disclose the contract amount.

LG Energy Solution and Ford Motor Company simultaneously reached an agreement for LG to supply batteries for a Ford electric vehicle produced in the United States. The battery production location was changed from LG Energy's factory in Poland to a factory in Michigan, USA. LG Energy Solution stated that this move is to supply locally, enhance business efficiency, and take advantage of existing favorable market conditions, such as the tax credits offered by the US government.

Several years ago, LG Energy Solution and General Motors established a joint battery venture, Ultium Cells, with each party holding a 50% stake. This joint venture is both an effort by General Motors to catch up with the electrification trend and a demonstration of LG Energy Solution's ambition to target the North American market and expand its global market share. While announcing the disposition plan for the third factory jointly constructed by both parties, General Motors and LG Energy Solution also announced the expansion of their 14-year battery technology partnership and plan to develop prismatic cells.

Image source: LG New Energy

In October 2024, LG Energy Solution announced that it had signed an agreement to supply electric vehicle batteries to Mercedes-Benz subsidiaries in North America and other regions.

At that time, LG Energy Solution stated in a regulatory filing that it would supply 50.5 gigawatt-hours (GWh) of batteries to Mercedes-Benz between 2028 and 2038, but declined to disclose the specific amount agreed upon in the contract or to comment on which specific Mercedes-Benz subsidiaries were involved. Following the announcement of the deal, LG Energy Solution’s share price once rose by as much as 5.7%.

In March of this year, LG Energy Solution announced plans to expand production in North America. After 2025, the company’s production capacity in North America will exceed 200 GWh, enough to supply 2.5 million pure electric vehicles with a range of over 500 kilometers.

On March 23, LG Energy Solution announced that it is establishing a joint venture plant with the American automaker Stellantis in Ontario, Canada. The total investment amounts to 4.8 trillion Korean won, and production is set to begin in the first half of 2024. The new plant's capacity is expected to increase to 45GWh by 2026.

In addition, LG Energy Solution will invest 1.7 trillion KRW to build a cylindrical battery plant with a capacity of 11GWh in Arizona, USA, in order to provide stable supply to major American electric vehicle customers.

Warning Signal:The tram may face a "hangover period."The competitive landscape among Chinese enterprises is intense.

Despite a significant surge in its Q2 operating profit, LG Energy Solution has warned that market demand for electric vehicle batteries is expected to further slow down in early next year due to U.S. tariffs and policy uncertainties. Its major customers, Tesla and General Motors, have also cautioned that U.S. tariff policies and the expiration of the federal electric vehicle tax credit on September 30 will have negative impacts.

LG Energy Solution's Chief Financial Officer Lee Chang-sil stated in a conference call: "The U.S. tariff policy and the early termination of electric vehicle subsidies will place a burden on automakers, potentially leading to an increase in vehicle prices, thereby slowing down the growth rate of electric vehicles in the North American region."

This statement is not made lightly; it is based on in-depth analysis and judgment of major global markets, reflecting the multiple challenges currently facing the global electric vehicle market.

According to data from Rho Motion, global sales of new energy passenger vehicles reached 1.8 million units in June 2025, a year-on-year increase of 24%. Among them, China continued to lead with 1.11 million units sold and a growth rate of 28%. Europe consolidated its position as the second largest market with 390,000 units sold and a 23% increase. In contrast, the North American market, affected by policy fluctuations, declined by 9% year-on-year to 140,000 units. Meanwhile, "other regions of the world" saw explosive growth of 43%, surpassing the 140,000-unit mark.

The Trump administration reportedly moved the expiration date for new energy tax credits from the end of 2025 to September 30, involving an amount as high as $192 billion, directly triggering a buying frenzy in the third quarter.

Tesla's official website (TSLA.US) shows a surge in orders for Model 3 and Model Y before the policy deadline, while Ford is attracting consumers by extending its free charging service.

However, a Barclays research report warns that the policy vacuum will lead to an "electric vehicle hangover" in the fourth quarter and beyond, meaning that sales will drop sharply in the subsequent months.

Wood Mackenzie has even lowered its forecast for the US pure electric vehicle market share in 2030 from 23% to 18%.

Coincidentally, even though the sales of new energy passenger vehicles in Europe continue to grow, the long-term prospects are still not considered favorable.

According to a report by Germany's Frankfurter Allgemeine Zeitung on June 25, data from the European Automobile Manufacturers Association's Brussels headquarters shows that the registration of new cars in the EU increased by 1.6% year-on-year in May. Additionally, according to the Cyprus Mail on June 26, the EU electric vehicle market as a whole grew by 27.2% year-on-year in May.

The European electric vehicle market experienced a "rebound" in May, but still faces many challenges. According to Deutsche Welle, although Europe will have more than one million public charging stations by 2025, GridX Energy Research predicts that by 2030, the demand for public charging stations in Europe will reach 8.8 million. The company states that in order to achieve this goal, the installation speed must be accelerated to nearly 5,000 new charging stations per week.

In addition, "U.S. tariffs have dealt a heavy blow to European car manufacturers." According to a previous Reuters report, several companies have withdrawn their profit forecasts for 2025. A senior executive in the European automotive industry stated that high-end car manufacturers can bear certain tariffs, but most car manufacturers face greater difficulties. The European Automobile Manufacturers Association believes that given the escalating global trade tensions, a full recovery in external demand seems unlikely. European automotive industry activity may recover by 1.9% in 2026, but production will still be far below 2019 levels.

Of course, compared to the North American market, there is still some potential in the European new energy vehicle market.

Despite declining demand in the U.S. market and uncertainties in tariff policies, Volkswagen Group's global sales in the second quarter of this year still saw a slight increase of 1.2%, reaching 2,271,700 vehicles, thanks to the strong sales of its pure electric models in Europe. Among them, deliveries of pure electric vehicles amounted to 248,700 units, a year-on-year increase of 37.6%.

However, it should be noted that Volkswagen Group's battery supplier system is very complex, and LG Energy Solution faces strong competition from Chinese companies.

In addition to CATL and Gotion High-Tech, the Volkswagen Group is also expanding its partnerships with other Chinese battery suppliers.

In July, there were reports that Dr. Thomas Ulbrich, CTO of Volkswagen (China) Technology Co., Ltd. (VCTC), stated in an interview that Volkswagen's new electric platform in China is "the next big thing."

On such a platform project, battery expert CALB has secured a nomination from Volkswagen (China) Investment Co., Ltd. thanks to its mature and reliable 5C fast charging technology. By the end of 2027, CALB will simultaneously supply FAW-Volkswagen, SAIC Volkswagen, and Anhui Volkswagen. This project is for pure electric vehicles and may involve five models, with battery expert CALB potentially supplying at least half of the shares, with a total capacity of up to 88 GWh.

It is reported that CALB has been in contact with Volkswagen and undertaken R&D projects for several years, and has already received recognition for several projects from Volkswagen’s subsidiaries. The awarding of this new platform project may indicate that CALB’s position within Volkswagen’s supplier system has gradually become more stable.

Coincidentally, also in July, media reports revealed that Volkswagen has awarded new battery orders for prototype vehicles to Jiangsu Zhengli New Energy Battery Technology Co., Ltd.

If the news is true, another Chinese battery company will be added to Volkswagen’s supplier list, which also means that its localization efforts in China will be further deepened.

The situation in the Chinese market is more complex.

In recent years, competition in China's electric vehicle market has been exceptionally fierce, and the price war has been escalating. Entering 2025, the price war continues, and automakers, in order to reduce costs, are increasingly shifting the pressure onto upstream battery suppliers, demanding ever stricter requirements on battery prices.

LG New Energy's performance in China's power battery market has been consistently unsatisfactory, with its market share remaining at a low level for a long time.

On July 10th, the China Association of Automobile Manufacturers and the China Automotive Power Battery Industry Innovation Alliance respectively released the automobile industry production and sales figures for June 2025, as well as the monthly power battery information for June 2025.

Data show that in January-June 2025, the TOP15 companies by installed capacity of power batteries in China are as follows: CATL (installed capacity: 128.60 GWh; market share: 43.05%), BYD (70.37 GWh; 23.55%), CALB (19.46 GWh; 6.52%), Gotion High-Tech (15.48 GWh; 5.18%), EVE Energy (12.21 GWh; 4.09%), Sunwoda (9.07 GWh; 3.03%), SVOLT (8.40 GWh; 2.81%), REPT BATTERO (6.59 GWh; 2.21%), Jeve Power (5.95 GWh; 1.99%), Gotion New Energy (4.23 GWh; 1.41%), LG Energy Solution (4.18 GWh; 1.40%), Inpai Battery (3.29 GWh; 1.10%), Do-Fluoride (2.20 GWh; 0.74%), Chenergy (1.90 GWh; 0.63%), and Yuanhang Jinli (1.31 GWh; 0.44%).

Image source: China Automotive Battery Innovation Alliance

Stock prices are a direct vote by the capital market on a company’s value. The decline in LG Energy Solution’s share price following its earnings report reflects the market’s concerns about the sustainability of its performance. When evaluating a company, investors focus not only on its short-term profit performance, but also place greater importance on its ability to maintain profitability over the long term.

In the short term, LG New Energy achieved substantial profit growth by leveraging the tariff stockpiling effect, but this growth model lacks sustainability.

In the long term, competition in the global electric vehicle market is becoming increasingly fierce, and LG New Energy is facing challenges from multiple fronts. Technologically, competitors such as CATL and BYD are continuously launching new technologies and products, such as CATL's Qilin battery and BYD's blade battery, which all have significant performance advantages.

In terms of cost, Chinese battery companies have greater competitiveness in cost control due to their economies of scale and advantages in the supply chain, making it difficult for LG Energy Solution to compete with them on price.

Prioritize strategies, shift from "making quick money" to "honing internal skills."

Faced with market uncertainties and increasingly intense competition, LG Energy Solutions has begun adjusting its investment strategy by concentrating resources on more promising areas, while delaying or scaling back some higher-risk investment projects.

In April this year, there was news that LG Energy Solution had decided to postpone the two joint ventures for lithium battery recycling with Huayou Cobalt.

In the same month of April, LG Energy Solution announced that it has officially withdrawn from an electric vehicle battery manufacturing project in Indonesia valued at 142 trillion Indonesian rupiah. It is reported that at the end of 2020, LG Energy Solution signed an agreement with the Indonesian government for the so-called "Indonesia Grand Project Package," which encompassed multiple investments in the electric vehicle battery supply chain.

In May, according to the Korean "Financial Times," due to the downturn in the electric vehicle battery industry, LG Energy Solutions, after suspending or shelving plans to advance large-scale production base construction in Indonesia, Canada, and other locations, recently canceled its investment plans in Vietnam. Analysts suggest that amid increasing uncertainties, LG Energy Solutions is temporarily focusing on ensuring profits.

According to local industry sources in Vietnam, LG Energy Solution has canceled its plan to move into the LH Industrial Park near Hanoi, Vietnam. To meet the requirements of its client companies and its own plan to capture the Southeast Asian electric vehicle market, LG Energy Solution intends to relocate part of its mobile battery production line and the 2170 cylindrical battery production line for electric vehicles from Nanjing, China, to Vietnam.

At the end of last year, LG Energy Solutions suddenly announced the withdrawal of its investment.

An industry insider in the battery sector stated that due to concerns about oversupply, companies are very cautious about new investments.

Image Source: LG Energy Solution

According to the Korean Financial Times, LG Energy Solution's average operating rate was 69.3% in 2023, 57.8% in 2024, and 51.1% in the first quarter of this year, showing a downward trend.

Although many project investments have been canceled, LG has not abandoned its investment in the electric vehicle battery business.

According to Yonhap News Agency, LG Group plans to invest 106 trillion Korean won (approximately 561.8 billion RMB) in South Korea over the next five years. The investment will be used for research and development and future growth areas, including batteries and battery materials, next-generation displays, artificial intelligence and data, biotechnology, and other fields of R&D.

LG Energy Solution remains proactive, especially in the research, development, and production of 46-series batteries.

LG Energy Solution has long been considered the first Korean company to mass-produce 46-series batteries. According to plans, LG Energy Solution will begin mass production at its Ochang plant in Korea in the second half of 2025. Reports from April this year indicate that, so far, LG Energy Solution is still in the preparation stage for large-scale mass production of the 4680 model (46mm diameter/80mm height). It is reported that LG Energy Solution is currently conducting final specification tests for the 4680 battery with automakers such as Tesla.

More importantly, customer concentration is an important indicator for measuring a company's operational risk. Excessively high customer concentration can cause a company's operating performance to rely heavily on a few customers. If the demand from these customers changes or if cooperation issues arise, the company will face significant operational risks.

For LG Energy Solution, the risk of customer concentration is particularly noteworthy, with a high proportion of customers from European and American automakers led by Tesla being the main issue.

The 46-series battery precisely opened a new customer window for LG Energy Solution.

On June 16, Gasgoo noticed that, according to Yonhap News Agency, South Korean battery manufacturer LG Energy Solution announced that it has signed a six-year supply agreement with Chinese automaker Chery Automobile for 46-series large cylindrical batteries.

According to the agreement, LG Energy Solution will supply Chery Automobile with 46-series large cylindrical batteries, with an order volume reaching 8 gigawatt-hours (GWh). Based on the industry average installation capacity of approximately 65-70 kWh per electric vehicle, this is sufficient to meet the production demand for about 120,000 electric vehicles.

Although the specific value of the contract has not yet been determined, considering the current price trends in the battery market and the development trend of cylindrical battery technology, the order amount will undoubtedly be considerable.

Industry experts speculate that the contract amount may exceed 1 trillion Korean won.

Previously, LG Energy Solution’s 46-series large cylindrical batteries were mainly supplied to American electric vehicle startups Tesla and Rivian, with models equipped with these batteries including the Model Y, Cybertruck, and Rivian R2, among others. The addition of Chery Automobile has further expanded LG Energy Solution’s global customer base, making it the third automaker in the world to use this battery.

It is also worth mentioning that, with the rapid development of the flying car and robotics industries, large cylindrical batteries will embrace a broader market space.

Large cylindrical batteries perform exceptionally well in the robotics field, especially in humanoid robots. Due to their high flexibility and easy combinability, cylindrical batteries are particularly suitable for application scenarios in humanoid robots, whereas prismatic cells find it difficult to achieve this. In the field of flying cars, large cylindrical batteries also demonstrate their unique advantages. Taking eVTOLs (electric vertical take-off and landing aircraft) as an example, large cylindrical batteries can provide higher energy density and power density, meeting the safety requirements under extreme conditions.