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SEOUL (Reuters) -Battery maker LG Energy Solution (LGES) said on Friday demand for electric vehicle (EV) batteries in North America would likely stay strong this year, boosting its revenue, despite lingering worries about inflation.
The South Korean company, which supplies Tesla (NASDAQ:TSLA), General Motors Co (NYSE:GM) and others, said it is targeting revenue growth of 25-30% this year, aiming to achieve up to 33.3 trillion won ($27 billion) in revenue.
LGES’s fourth-quarter profit tripled as it ramped up production to address a huge order backlog from automakers rushing to take a bigger bite out of the growing electric vehicle market.
It plans to raise capital expenditure by 50% or more this year compared to 2022.
When asked whether a series of price cuts by major client Tesla would affect battery prices, LGES said it expected there would be a limited impact on overall battery prices.
Tesla said on Wednesday its aggressive price cuts have ignited a wave of demand for its vehicles, playing down concerns that a weak economy would throttle buyers’ interest.
“Although we are seeing some negative macro issues, such as high interest rates and inflation, EV demand would likely stay strong, especially for Tesla as well as other automakers as they are entering an apparent EV price war,” said Kang Dong-jin, an analyst at Hyundai Motor Securities.
While LGES noted some negative economic factors such as such softening EV demand, especially in Europe, the company offered a positive outlook in the North American market, where the company sees a growing number of customers requesting made-in-USA batteries to be qualified for federal EV subsidies.
The firm, which has joint battery plants with GM, Stellantis NV and Honda Motor Co Ltd in North America, said its battery order backlog rose to 385 trillion won by the end of December, or more than 15 times its projected 2023 revenue.
LGES said in a conference call it expects nearly half of its global battery production capacity would be designated for the North American region in the future.
LGES currently supplies batteries to Tesla from China, and said it is in “active discussions” with the Elon Musk-controlled company and other electric vehicle startups to supply batteries from the supplier’s proposed Arizona factory.
LGES said it was reviewing its investment commitments in the proposed Arizona plant, without elaborating.
LGES reported operating profit of 237 billion won ($193 million) for the October-December period, versus 76 billion won a year earlier.
That compared with an average analyst forecast of 256 billion won compiled by Refinitiv SmartEstimate.
It missed analysts’ estimates because of one-off costs such as energy storage system-related provisions and year-end bonuses.
Revenue for the quarter rose 92% to 8.5 trillion won, LG Energy said in a regulatory filing.
Shares of LGES, carved out of LG Chem Ltd in a market debut last year, fell 0.4% in afternoon trade, versus the benchmark KOSPI‘s 1% rise.
($1 = 1,232.3200 won)
