Published by Global Banking & Finance Review®
Posted on July 25, 2025
3 min readLast updated: January 22, 2026
LG Energy Solution warns of reduced EV battery demand due to U.S. tariffs. The firm plans to increase ESS battery production to mitigate impacts.
By Heekyong Yang and Hyunjoo Jin
SEOUL (Reuters) -South Korean battery firm LG Energy Solution warned on Friday of a further slowdown in demand by early next year due to U.S. tariffs and policy uncertainties after it posted a quarterly profit jump.
Its major customers Tesla and General Motors warned of fallout from U.S. tariffs and legislation that will end federal subsidies for EV purchases on September 30.
"U.S. tariffs and an early end to EV subsidies will put a burden on automakers, potentially leading to vehicle price increases and a slowdown in EV growth in North America," CFO Lee Chang-sil said during a conference call.
However, LGES said it expected to improve profits in the second half by boosting production of batteries for energy storage systems (ESS) to offset the sluggish EV demand, while cutting or delaying investment plans.
LGES is one of the few U.S. producers of LFP batteries, a battery chemistry long dominated by Chinese rivals.
The company said it is considering converting some EV battery production lines in the United States to cater to ESS in response to slowing EV demand.
It started production of LFP batteries at its Michigan factory in May, and aims to increase production capacity of ESS batteries to over 30 gigawatt hours (GWh) by next year, up a projected 17 GWh this year.
"When LGES operates the plant at full capacity, it could generate subsidies for nearly 2 trillion won ($1.5 billion) ... unlike EV batteries, ESS involves selling full systems rather than just battery cells, which drives up average selling prices and margins," said Kang Dong-jin, an analyst at Hyundai Motor Securities.
Kang added that LGES currently stands as the only player in the U.S. market capable of supplying LFP-based ESS, giving it an advantage with virtually no competition.
LGES said its operating profit more than doubled in the second quarter, thanks to U.S. subsidies on battery production and stockpiling by some customers there ahead of potential tariffs.
It reported an operating profit of 492 billion won ($358.73 million) for the April to June period, versus a profit of 195 billion won a year earlier.
LGES would have made a 1.4-billion-won operating profit excluding a tax credit it received under the U.S. Inflation Reduction Act, LGES said in a regulatory filing.
LGES shares were trading down 1.6% after the earnings announcement in morning trade, versus benchmark KOSPI's 0.3% rise.
($1 = 1,377.6000 won)
(Reporting by Heekyong Yang and Hyunjoo Jin; Editing by Clarence Fernandez and Stephen Coates)
An EV battery is a rechargeable battery used to power electric vehicles. It stores electrical energy and provides the necessary power to drive the vehicle.
LG Energy Solution is a South Korean company specializing in the production of batteries, particularly for electric vehicles and energy storage systems.
Operating profit is the profit a company makes from its core business operations, excluding deductions of interest and taxes. It reflects the efficiency of the company's operations.
Energy storage systems (ESS) are technologies that store energy for later use. They help balance supply and demand in energy systems, especially for renewable energy sources.
Explore more articles in the Finance category
