LG Energy Solution forecasts 20%-plus sales growth in Q3, GM joint venture plant to resume operations

LG Energy Solution signaled a meaningful earnings recovery starting in the third quarter. Despite posting an operating loss for the first half of the year, the company projected third-quarter sales growth of more than 20% quarter-on-quarter, driven by expanded shipments of energy storage systems and cylindrical batteries alongside the restart of its General Motors joint venture factory.

Lee Chang-sil, LG Energy Solution's chief financial officer and executive vice president, said during a second-quarter earnings conference call Thursday that ESS shipments are expected to rise by at least 50% from the previous quarter as new North American production capacity comes online. "We expect company-wide sales to grow more than 20% quarter-on-quarter," she said.

LG Energy Solution posted second-quarter sales of 7.56 trillion won ($5.21 billion) and operating profit of 113.3 billion won. The result marked a return to the black from an operating loss of 207.8 billion won in the first quarter, though the company still recorded a cumulative operating loss of 94.5 billion won for the first half. The company plans to pursue its annual growth targets in the second half by improving utilization rates for ESS, cylindrical batteries and pouch batteries for electric vehicles.

ESS is the central pillar of the company's earnings recovery. LG Energy Solution said power demand in North America is rising rapidly on the back of growing investment in AI data centers, and that demand for ESS to ease grid bottlenecks is expanding in tandem.

Power infrastructure for AI data centers is emerging as a new market, the company said. Behind-the-meter demand — where data center operators build their own on-site power facilities rather than relying solely on the existing grid — is on the rise.

Lee Yeon-hee, head of management strategy at LG Energy Solution, said surging power demand from AI data centers has made grid bottlenecks the biggest risk to AI infrastructure investment. "We expect behind-the-meter ESS solutions to see significantly expanded demand in connection with AI data center investment," she said.

On competition from Chinese manufacturers, the company said subsidy requirements and supply chain regulations would serve as barriers to entry. Lee Yeon-hee acknowledged that Chinese rivals are continuing to enter the US market by building factories in the country, routing through third countries or using licensing, royalty and service arrangements. However, she said their expansion would remain limited because regulations on prohibited foreign entities make it difficult for them to secure subsidies under the Advanced Manufacturing Production Credit or the Investment Tax Credit.

LG Energy Solution plans to expand ESS production capacity on the back of stable operations at its five North American cell manufacturing sites. The company will increase pack and link production capacity alongside cell output to strengthen its supply response, and aims to complete the conversion of existing EV production capacity to ESS by year-end.

The company pointed to the fourth quarter as the inflection point for profitability improvement. The second-quarter operating profit of 113.3 billion won included 241 billion won in Advanced Manufacturing Production Credits under the US Inflation Reduction Act. Excluding that subsidy, the second-quarter operating result would have been a loss of 127.7 billion won, with an operating margin of negative 1.7%.

Lee Chang-sil said stabilizing the full production system for the ESS business would require time and cost. "We will do our best to secure ESS profitability — even excluding the IRA effect — from the fourth quarter, when all five new regional operations have stabilized and volume benefits are maximized," she said.

In the EV battery business, the restart of the General Motors joint venture plant is a key variable. The first Ultium Cells plant, which halted operations in the first half due to slowing North American EV demand, is scheduled to resume production from the middle of the third quarter.

Ahn Min-gyu, executive director of automotive battery planning and management at LG Energy Solution, said the plant had been idled in the first half as a key North American strategic customer prioritized drawing down existing inventory while adjusting the pace of its EV business. "Ultium Cells Plant 1 is currently preparing to resume production and plans to restart as scheduled from the middle of the third quarter," he said.

In Europe, volume growth centered on mid-nickel and LFP solutions for key customers is expected to continue, with the company projecting a significant increase in second-half sales compared with the first half.

Cylindrical batteries are also identified as a growth driver for the second half. Noh In-hak, executive director of small battery planning and management at LG Energy Solution, said cylindrical battery volumes have grown every quarter since the second half of last year. "We expect the solid volume growth trend in cylindrical batteries to continue not only through the second half of this year but into next year as well," he said.

The 46-series cylindrical battery is approaching the start of operations at the company's Arizona factory. Lee Chang-sil said the 46-series line being prepared in Arizona offers more than 50% better production efficiency than the Ochang facility. "We will begin operations in the fourth quarter of this year and work to secure additional orders with a range of customers, translating that into visible results," she said.

In next-generation batteries, LG Energy Solution is simultaneously preparing products for robots, battery backup units, sodium-ion applications and all-solid-state batteries. Noh said the company is working to build a stable sales portfolio by supplying batteries for a range of applications — including robots and BBUs — and by entering new markets.

The company's order strategy is also being realigned around ESS and mid-to-low-cost EV batteries. Lee Sang-hyun, executive director of planning and management at LG Energy Solution, said the ESS focus is on securing stable sales and profit in the North American grid market. "We are actively pursuing orders this year targeting major US utility companies and developers building AI data center projects," he said.

On EV batteries, Lee Sang-hyun said the company is working to secure additional orders from existing customers in Europe and Asia, centered on mid-to-low-cost solutions such as mid-nickel and LFP chemistries. He added that discussions on the 46-series cylindrical battery are continuing with multiple customers in the United States and Europe.

LG Energy Solution plans to lift second-half utilization rates and profitability through ESS, cylindrical batteries and mid-to-low-cost battery products, even as North American EV demand recovery remains sluggish.

Lee Chang-sil said the payoff may come somewhat later than originally expected but expressed confidence in the company's trajectory. "The results may take a little longer than we initially hoped, but the business foundation we are building and the differentiated competitiveness we have accumulated will translate into greater value and results over time," she said. "We will repay your trust through execution rather than haste, and through results rather than expectations."