Tesla Supplier LG Energy Expresses Concerns Over 2024 Revenue Growth Amid Rising Interest Rates
Tesla supplier LG Energy Solution (LGES) has raised concerns about slower revenue growth in 2024, reflecting shared apprehensions expressed by Tesla CEO Elon Musk regarding the influence of high interest rates on electric vehicle (EV) sales.
During the recent disclosure of its Q3 2023 earnings, LGES cautioned investors about a potential deceleration in revenue expansion for the forthcoming year. The company attributed this projected slowdown to uncertainties in the global economy, which could exert an impact on the sales of electric vehicles. LGES is not the sole entity harboring these worries; a variety of automakers and suppliers have also voiced their concerns about the demand for EVs amidst the backdrop of rising interest rates. These industry stakeholders are worried that heightened interest rates might drive up financing costs, which could impede growth in significant economies such as China and Europe. This, in turn, could affect prospective car buyers in the long term.
Tesla CEO Elon Musk conveyed similar concerns about interest rates during the company's most recent earnings call. He underlined the pivotal role of monthly payments in the car-buying process and explained that as interest rates climb, the portion of the monthly payment allocated to interest naturally swells. Musk underscored the potential hardship that individuals might face in affording a car if interest rates persist at elevated levels or surge even further.
In its financial results for Q3 2023, LGES reported revenue of KRW 8.22 trillion, marking a 6.3% contraction compared to the previous quarter but registering a 7.5% uptick year-over-year. The company also divulged an operating profit of KRW 7.31.2 billion, signifying a 58.7% surge quarter-on-quarter and a 40.1% upswing year-over-year.
These shared concerns from both LGES and Tesla's CEO underscore the significant influence of interest rates on the automotive industry, with a particular focus on the EV sector, as it grapples with an array of economic challenges in the coming years.