LGES Profit Plunge
LG Energy Solution Sees Q2 Profit Plunge 77% Due to Slowing EV Market, JV Suspensions
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Key Points
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LG Energy Solution's Q2 operating profit of 113.3 billion won fell well short of the consensus estimate of 210.7 billion won, highlighting investor concerns about a slower rebound in U.S. EV demand.
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LGES began mass production of lithium iron phosphate (LFP) batteries for energy storage systems at its Michigan plant, signaling a shift to bolster ESS capacity amid EV softness.
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Excluding the U.S. IRA AMPC tax credit, quarterly revenue still topped 7 trillion won for the first time since Q4 2023, suggesting early signs of demand stabilization in certain segments.
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For the first six months of 2026, LGES swung to an operating loss of 94.5 billion won while sales rose to 14.1 trillion won, underscoring ongoing profitability headwinds despite rising revenue.
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LGES terminated its long-term battery supply agreement with Ford Motor Co. after receiving a notice from Ford, reflecting strategic shifts in the U.S. EV supply chain.
LG Energy Solution's second-quarter operating profit collapsed 77% to 113.3 billion won ($74 million), missing analyst estimates of 210.7 billion won by a wide margin, according to Korea JoongAng Daily. Weak electric vehicle demand in North America and halted production at U.S. joint ventures were the main culprits.
Strip out a 241 billion won U.S. tax credit — known as the AMPC subsidy under the Inflation Reduction Act — and LGES actually posted an operating loss of 127.7 billion won for the quarter, NDTV Profit reported. For the first half of 2026, the company swung to an overall operating loss of 94.5 billion won, even as sales climbed to 14.1 trillion won.
Ultium Shutdowns and Ford Deal Cancellation Drag Results
LGES's U.S. joint venture Ultium Cells suspended operations at plants in Ohio and Tennessee. The shutdowns reflected slowing EV orders from American automakers. At the same time, LGES terminated its long-term battery supply deal with Ford Motor Co. after Ford sent a cancellation notice. The move signals a broader reshuffling in the U.S. EV supply chain, Korea JoongAng Daily reported.
North American EV demand has stayed soft, and LGES expects that headwind to continue. The company will release its full, detailed Q2 results on July 30. Investors are watching closely to see whether the Ford exit foreshadows further contract losses with other automakers.
Revenue Hit a Milestone, Powered by Energy Storage Surge
Despite the profit slump, revenue rose 24.8% year over year to 7.56 trillion won, according to The Korea Herald. Quarterly revenue topped 7 trillion won for the first time since Q4 2023, even before counting the AMPC tax credit. That milestone was driven almost entirely by a surge in energy storage system (ESS) shipments — large batteries used to store power on electrical grids.
LGES also started mass production of lithium iron phosphate (LFP) batteries at its Michigan plant. LFP is a cheaper, longer-lasting battery chemistry now widely used in grid storage. New 46-series cylindrical batteries — a next-generation cell format — began shipping to European customers, adding another revenue stream outside the struggling EV market.
U.S. Tax Credit Is Propping Up the Bottom Line
The 241 billion won AMPC credit — a per-kilowatt-hour subsidy paid to battery makers who produce cells in the U.S. — is the only thing keeping LGES in the black this quarter. Without it, the company loses money. The Edge Malaysia noted that the company's operating profit came in far below even the most pessimistic analyst forecasts.
The gap between reported profit and underlying profit worries investors. If U.S. policy shifts reduce or eliminate the AMPC credit, LGES's losses would deepen quickly. The company has not said publicly how long it expects to rely on the subsidy to stay profitable.
Michigan Expansion and Honda JV Offer a Path Forward
LGES is not standing still. The company is expanding production capacity in Michigan and running a joint venture in Ohio with Honda. Those moves are aimed at winning new EV customers to replace lost Ford volume. New ESS contracts in North America also give the company a buffer while the EV market recovers, The Korea Herald reported.
Analysts say the ESS business is now the company's most reliable growth engine. Grid-scale battery demand is rising fast globally as power grids add more renewable energy. Whether that momentum can fully offset the EV slowdown — and shrinking automaker contracts — is the central question heading into the second half of 2026.
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