LG Energy Solutions has set a mid- to long-term goal of achieving 'more than three-fold growth in annual sales and double-digit operating profit margin within the next five years'. Its goal is to achieve 60 trillion won in annual sales and become the world's leading battery company.
At its Q2 earnings briefing on the 27th, LG Energy Solution said, “We will triple our sales within 5 years by expanding joint ventures (JV) with major automakers in North America, expand supply of cylindrical batteries and develop new form factors.” It plans to strengthen the stable operation of its value chain and quality manufacturing capabilities by securing technological leadership by developing differentiated materials and processes, as well as investing in upstream equity, and expanding long-term supply contracts.
It decided to focus on the North American market, which is expected to grow the fastest. It will expand JV with major customers with the pouch, and it will increase the supply of existing customers and electric vehicle startups with the cylindrical shape. It plans to establish a new cylindrical production base in Europe, secure new production bases outside of China in Asia, and respond quickly to market demand.
In addition, major new cars such as GM Cadillac Lyriq, Chevrolet Equinox, and Hyundai Ioniq 6 equipped with LG Energy Solutions' batteries will be released this year. Furthermore, the first joint plant with GM (Ohio) has been completed and will begin normal operation from the third quarter. In the future, the production capacity will be expanded to more than 40GWh and shipments are expected to gradually increase.
Demand for electric vehicle pouch batteries is recovering for European customers such as Volkswagen, which suffered a major blow to semiconductor supply and demand, and solid electric vehicle cylindrical battery shipments to Tesla are on the rise. The sales volume of Volkswagen's 'ID3' and 'ID4' and Tesla's 'Model 3' and 'Model Y' increases, and the volume of GM's 'Hummer Pickup Truck' electric vehicle is also expected to rise. Accordingly, the company plans to respond quickly to the market by increasing its annual production capacity to 540GWh by 2025.
It will also strengthen its product lineup. For the pouch type, the premium will maintain its superiority in performance by applying single-particle NCMA (nickel, cobalt, manganese, aluminum) cathode materials and silicon anode materials, meanwhile the entry-level type will use lithium iron phosphate (LFP) and manganese rich new materials to create product diversification. It plans on early securing mass production technologies for a new form factor (4680) for cylindrical shapes.
Its strategy is to strengthen quality capabilities through smart factories and value chains. The company will block the possibility of defects by improving the product design and process, and will establish a complete inspection system for each process. The battery management system (BMS) safety diagnosis algorithm will also be improved to have an independent system that detects abnormalities in advance.
It is also speeding up the construction of smart factories. The company aims to achieve yield improvement and quality stabilization, process and productivity improvement, and workforce efficiency through proprietary solutions based on data. It plans on securing a stable supply chain through upstream equity investment and expansion of long-term supply contracts for the value chain, while also establishing a used battery recycling system through strategic cooperation with leading companies.
On the same day, LG Energy Solutions raised its sales target for this year to 22 trillion won. This is an increase of 2.8 trillion won from their previous 19.2 trillion won annual sales target, announced earlier this year. Annual sales last year were 17.9 trillion won. The company expects to achieve 12.6 trillion won in sales in the second half of this year. This is a 48% increase for the same period of the previous year (8.5 trillion won) and a 34% increase from the first half (9.4 trillion won).
LG Energy Solution said, "We expect high sales growth in the second half of this year, compared to the first half, due to customers launching new cars, the first JV operation with GM, increased volume due to increased demand from major customers, and the linking effects of raw material prices."
The company achieved 5.706 trillion won in sales and 1956 billion won in operating profit in the second quarter of this year. Compared to the previous quarter, sales rose by 16.8% and operating profit fell by 24.4%. Once-off items such as licensing fees and provisions are reflected in these sales and operating profit figures, but if it excludes them, it is just a slight drop compared to the same period of the previous year.
By staff reporter Tae-joon Park (gaius@etnews.com)