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Tesla battery supplier LG Chem expects Q3 profit as EV business takes off

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LG Chem, among Tesla’s battery providers, stated on Monday that its third-quarter profit has probably jumped to a record , possibly beating the expectations of analysts. While the company did not provide details of its results, analysts are speculating that the company’s optimistic prognosis might be partially attributed to LG Chem’s partnership with Tesla, which is ramping its operations in China. 

Even though the pandemic has wreak havoc across the marketplace, LG Chem seems to be weathering the storm quite well. Apart from Tesla’s expanding business in China and the electric vehicle manufacturer ’s ramp of its Model 3 production, LG Chem was able to deal with the need for the rising demand for appliancesthanks to its petrochemical products. 

As noted in a Reuters report, LG Chem estimated its operating profit was able to jump 159 percent to 902 billion won ($788.94 million) in Q3 2020, over analysts’ estimate of 746 billion obtained. Revenue is expected to grow 9% to 7.5 billion won in comparison to 2019 too. 

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Overall, analysts expect LG Chem’so battery business to remain profitable in Q3 2020. The company’s petrochemicals business is expected to post solid gains in the next quarter too. 

Yet despite these optimistic quotes, LG Chem stocks have met some pressure on the marketplace, partially due to problems with fires at the Hyundai Kona Electric, which utilizes the company’s battery cells. LG Chem has stated that its batteries weren’t the origin of this Hyundai Kona Electric’s flames, though the particular reason for these episodes hasn’t yet been decided as of yet. 

Aside from this, LG Chem can be setting some pressure after it announced last month it would be turning off its own battery business to its own company. Furthermore, the South Korean firm has sensed headwinds after Tesla’s announcement of its own battery mobile production strategies. That having been said, Tesla has promised its partners like Panasonic, LG Chem, and CATL it plans to keep its own battery partnerships even supposing it’s producing its own cells. 

LG Chem, along with CATL, is a key supplier of battery cells such as Tesla’s operations in Gigafactory Shanghai, in which the Made-in-China Model 3 is currently created. Recent reports have emerged pointing to the China-based factory raising its output that this fourth quarter to record levels. 

LG Chem is expected to launch its third quarter earnings report after this month.

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