LG Energy Solution Powers Through: Weak Won and IRA Incentives Drive 138% Profit Surge Amid EV Market Slowdown

South Korea’s LG Energy Solution, a global leader in EV battery manufacturing, posted a remarkable 138% increase in first-quarter operating profit for 2025. The boost comes despite a broader slowdown in electric vehicle sales across key international markets. A favorable exchange rate — with a weakened Korean won — significantly supported the company’s export-driven business, cushioning the impact of softening demand.

LGES reported operating profit of 375 billion won (approximately $262 million) for the January–March period, in line with analyst expectations and well above the 157 billion won recorded a year earlier. These results underscore the company’s ability to maintain profitability even as the global EV industry enters a more cautious growth phase.

Major Clients and the Role of U.S. Incentives

LG Energy Solution supplies batteries to major global automakers including Tesla, General Motors, and Hyundai Motor. Strategic partnerships with these industry giants have helped LGES maintain relevance and scale despite market headwinds. However, in a regulatory filing, the company acknowledged that without tax credits granted under the U.S. Inflation Reduction Act, it would have posted an operating loss of 83 billion won.

Key Drivers Behind LGES’s Quarterly Performance

1. Operating Profit: 375 billion won — up 138% year-over-year.
2. Revenue: 6.3 trillion won — a 2.2% increase from Q1 2024.
3. Anchor Clients: Tesla, GM, Hyundai.
4. FX Gains: Weak won bolstered margins on international contracts.
5. IRA Dependency: Without U.S. subsidies, LGES would have reported a loss.

Industry Forces at Play

1. Slowing EV sales in the U.S. and European markets
2. Rising competition in the global battery sector
3. Increased raw material costs, particularly lithium and nickel
4. Supply chain uncertainty amid ongoing geopolitical tensions
5. A 2.1% decline in LGES stock following earnings release, while the KOSPI index (.KS11) edged up 0.1%

Strategic Resilience in a Transitional Phase

Despite macroeconomic and sector-specific challenges, LG Energy Solution has demonstrated strategic agility. Support from favorable currency movements and U.S. tax incentives has allowed the company to remain profitable amid declining EV market momentum. Yet the acknowledgment of an underlying loss absent policy support signals a potential vulnerability — one that may require rethinking aspects of the company’s long-term business strategy.