Hyundai, LG, Samsung to realign EV strategies amid falling demand

By Lee Min-hyung, The Korea Times - Hyundai Motor, LG Energy Solution and Samsung SDI are expected to realign their respective electrification strategies due to a possible earnings slowdown triggered by slowing electric vehicle (EV) demand here and abroad, market analysts and industry officials said Sunday.

Korea’s automakers and battery manufacturers reported solid earnings growth in the third quarter, but most of them are now bracing for a worst-case scenario due to multiple external factors such as weakening customer purchasing power, falling lithium prices and tougher competition with Chinese counterparts.

This is forcing readjustment in business portfolios and strategy to minimize earnings falls by next year, market insiders said.

According to a recent earnings report, LG Energy Solution, the nation’s largest battery manufacturer by market capitalization, reported an operating profit of 731.2 billion won ($538.4 million) between July and September, up 40.1 percent from a year earlier. Hyundai Motor also achieved drastic earnings growth of 146 percent during the same period, reporting an operating profit of 3.82 trillion won.

But they left open the possibility of weak earnings growth, citing unfavorable and unpredictable external market circumstances. Last week, Lee Chang-sil, chief financial officer of LG Energy Solution, said that he expects its earnings growth pace to slow down next year, as some automakers, such as General Motors and Ford, are moving to delay their electrification strategy amid falling consumer sentiment.

Reflecting on the pessimistic industrial outlook, market analysts are also revising down target stock prices of battery firms and automakers here.

“LG Energy Solution is forecast to report weak earnings in the fourth quarter due to falling metal prices and sluggish demand from its global auto clients,” Jeon Chang-hyun, an analyst at Daishin Securities, said. The brokerage house cut its target stock price down to 600,000 won per share, citing the slowdown in EV demand.

In a recent regulatory filing, Hyundai Motor also expressed concerns over uncertain market circumstances from the fourth quarter. Seo Gang-hyun, executive vice president at Hyundai Motor’s planning and finance division, said the uncertainty will prevail. He said the automaker would focus on defending against a possible fall in its profitability by revamping its product mix.

Yuanta Securities analyst Lee Hyun-soo said the overall change in the EV market will affect Hyundai’s short-term valuation.

“Even if the EV market is exhibiting double-digit growth, its pace is slowing down,” the analyst said. “Price competition is also getting tougher. Sales for EVs account for only a slim portion out of total auto sales, the change in market circumstance bodes ill for the automakers' valuation.”

Source: https://www.koreatimes.co.kr/www/tech/2023/10/419_362088.html 

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