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| LG Energy Solution's (LGES) factory in Cheongju, North Chungcheong Province / Courtesy of LGES |
By Park Jae-hyuk
Korea's electric vehicle (EV) battery makers have begun to enjoy increased earnings due to the U.S. Inflation Reduction Act (IRA), which offers tax incentives for their production and sales in North America.
While announcing on Friday that its first-quarter operating profit is estimated to have soared 144.6 percent year-on-year to 633.2 billion won ($480 million), LG Energy Solution (LGES) partially attributed the better-than-expected earnings to an envisioned 100.3 billion won tax credit in the U.S.
"Following the implementation of the Advanced Manufacturing Production Credit rules this year, we decided to start including the anticipated tax credits in our earnings," Korea's leading EV battery maker said in its press release.
The size of its first-quarter operating profit is virtually the largest ever in the company's history.
Although LGES posted 724.3 billion won in operating profit during the second quarter of 2021, this resulted from a 2 trillion won compensation it had received from SK On in the aftermath of their legal disputes.
In addition, LGES has been able to earn nearly half the size of its annual operating profit last year within the first quarter of this year.
"We plan to explain more specifically during our conference call on April 26," the company said.
Since the U.S. IRA took effect last year, LGES has been cited as one of the main beneficiaries of the new law, given that it has continued aggressive investments in the North American market.
The company is set to build its own factory in the U.S. state of Arizona, as well as multiple factories of the joint ventures it established in collaboration with global carmakers, such as General Motors and Honda Motor.
Securities analysts also expect Samsung SDI to show a year-on-year increase in its first-quarter operating profit, thanks to the growing global demand for EV batteries and the strong U.S. dollar against the Korean won.
In contrast, SK On, which entered the EV battery market latest among the three companies, seems to be continuing to suffer losses during the first quarter of this year, according to local securities firms.
SK On Executive Vice Chairman Chey Jae-won, however, dismissed concerns about the company, saying in a recent meeting with employees that he expects "tangible results" next year if the company successfully overcomes difficulties in the early stage.
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