[Click eStock] "LG Energy Solution, Mid-to-Long-Term Profitability Improvement with 4680 Cylindrical Battery Capacity Expansion"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities announced on the 15th that it expects mid- to long-term profitability improvement for LG Energy Solution through new investment in 4680 cylindrical battery facilities.

LG Energy Solution has initiated new equipment investment for 4680 cylindrical batteries at Ochang Plant 2, planning to invest 581.8 billion KRW by October 2023 to expand capacity by 9GWh. This corresponds to the volume for 135,000 units of 60~70kWh BEVs.

After partial mass production in the fourth quarter of next year, full-scale mass production is expected in 2024. Sales are anticipated to be fully reflected in 2024, with estimated revenue based on recent selling prices ranging from 1.3 trillion to 1.4 trillion KRW.

Researcher Changhyun Jeon of Daishin Securities stated, “In terms of performance, there will be little change in sales from 2023 to 2024 due to capacity expansion within the existing guidance,” and added, “Profitability improvement is expected in the mid- to long-term due to the expansion of cylindrical capacity, which has higher profitability compared to pouch cells, and an increase in its sales proportion.” Among cylindrical batteries, the new 4680 battery is expected to have higher profitability as a next-generation form factor compared to the existing 2170.

The company plans to be the first among Tesla battery vendors to mass-produce and supply the 4680 battery. It is scheduled to start mass production in November 2023, ahead of competitor Panasonic’s 10GWh mass production planned for March 2024. CATL currently lacks cylindrical product lines in addition to its existing prismatic LEP batteries.

Currently, Tesla urgently needs to expand the adoption of 4680 batteries to reduce costs. In September 2020, Tesla announced at Battery Day a plan to reduce battery costs by 56% over the next three years compared to existing costs.

Researcher Jeon evaluated, “Starting with the supply of new 4680 batteries, a full-scale expansion of high-end battery supply to Tesla and an increase in market share within Tesla’s customers are expected,” adding, “Based on EV sales volume in the first quarter, Tesla’s battery vendor market share is CATL 44%, Panasonic 36%, and LG Energy Solution 20%, but the supply share is expected to increase going forward.” He also said, “After pilot production at the Ochang plant, momentum is expected for new 4680 capacity expansion to respond to Tesla’s local demand in North America and Europe.”