South Korean Battery Makers Hit Hard by Decline in EV Demand

South Korean battery manufacturers faced a challenging year as the global demand for electric vehicles (EVs) waned, leading to substantial financial setbacks. SK On, one of the country's top battery makers, experienced a drastic 51% drop in sales, plummeting to 6.27 trillion won ($4.33 billion) last year. Concurrently, SK On's operating loss swelled to 1.13 trillion won, marking the first significant year-on-year sales decline since its parent company, SK Innovation, began breaking out earnings for its battery business in 2017.

The downturn was not isolated to SK On alone. It was part of a broader trend that saw all three major South Korean battery producers suffer sharp declines in annual sales. LG Energy Solution, another key player, reported its first decline in both annual sales and operating profit since its 2020 spinoff from the LG Group. Although the exact figures for LG Energy Solution's operating profit drop were not disclosed, the impact was described as significant.

The primary cause behind these financial setbacks was a notable decrease in global EV demand. This downturn compelled battery manufacturers to reassess and potentially scale back their plans for increased production. The decline in demand has affected not only battery makers but also the entire electric vehicle industry, signaling a significant challenge for future growth.

SK On's sales drop was the largest among the trio of companies, underlining the severity of the impact on its operations. Despite its efforts to navigate the challenging market conditions, SK On's financial performance indicates the magnitude of the industry's current struggles. LG Energy Solution's decline further underscores the widespread nature of this downturn.

This contraction in demand has led industry leaders to reconsider their production strategies. Initially poised to ramp up production to meet anticipated increases in EV demand, battery makers now face difficult decisions regarding capacity expansion and resource allocation. The re-evaluation of production plans reflects a cautious approach to managing resources amid uncertain market conditions.