LG Chem's battery business is officially independent

LG Chem's plan to spin off its battery business has been settled. On December 1, LG EnergySolution, a wholly-owned subsidiary of LG Chem, was formally established to 'supply diversified energy solutions.' Jin Zhong, the former president of LG Chem's battery business division, is now the CEO. It is reported that LG New Energy is building a global operating system with a total of 22,000 employees worldwide. It has production bases in Ocang, South Korea, Michigan, Nanjing, my country, and Wroclaw, Poland, and in Daejeon, South Korea, Troy, and my country. Nanjing and Frankfurt, Germany operate technology Ru0026D centers. LG New Energy has a registered capital of 100 billion won, and its main business will include car batteries, energy storage systems (ESS), and small batteries for smartphones and laptops. Its sales target is to reach 13 trillion won (approximately RMB 77.2 billion) this year and 30 trillion won (approximately RMB 178.3 billion) by 2024. At the same time, the annual output will be increased from 120GWh to more than 260GWh by 2023. However, LG Chem has been in a production expansion mode, and the net brought by it has now reached 8 trillion won (approximately 47.5 billion yuan), and its equity ratio has exceeded 100%. Due to limited funds, it is impossible to concentrate investment in other fields such as petrochemicals, leading to imbalances in investment among business departments, and deterioration of financial structure and business competitiveness. Therefore, LG Chem believes that the moment of structural profitability in the field of power lithium batteries is a good spin-off opportunity. As of September this year, the cumulative sales of LG Chem’s battery business were 8.2278 trillion won (approximately 48.9 billion yuan), which was the same as last year's annual sales (8.3502 trillion won). According to foreign media, LG Chem has a backlog of 150 trillion won (approximately RMB 891.4 billion) in the electric vehicle battery business, and it will spend approximately 3 trillion won (approximately RMB 17.8 billion) on facility expansion each year. Some analysts pointed out that as an independent subsidiary, LG New Energy is expected to receive strategic investment from important original equipment manufacturers and attract more funds from initial public offerings (IPO) to expand its battery production capacity. Li Changshi, director of operation and management of the original battery business division, will serve as the chief financial officer. He will lead the listing of the new company. Analysts predict that, given that the new battery company needs to immediately prepare capital to invest in the construction of factories, etc., the IPO will be promoted as soon as the second half of next year. LG Chem has stated that in order to ensure its absolute shareholding ratio, the shareholding ratio of LG New Energy will be maintained at 70% to 80% in the future. Foreign media have reported that Tesla is seeking to acquire up to 10% of LG New Energy. Although there are opportunities to attract external funds, the remaining issues such as battery fires and laws also pose challenges to LG New Energy. This year, General Motors announced the recall of nearly 69,000 Bolt, and Hyundai Motor announced the recall of nearly 25,600 KONAEV, which all point to the battery produced by LG Chem. Affected by the recall, CATL may eat away part of its share. According to data updated by SNEResearch a few days ago, from January to September this year, CATL’s electric vehicle battery usage reached 19.2GWh, accounting for 23.1% of the total 83GWh, surpassing LG Chem’s 18.9GWh (22.9%). Under the risk of fire recall and industry competition pressure, technology investment is crucial to LG New Energy. A few days ago, foreign media said that LG Chem will develop a modular battery pack integration platform MPI (ModulePackageIntegrationPlatform), and gradually transition to the elimination of the module link, directly composed of battery cells, the platform will reduce battery costs by 30%, energy density Increase by 10%. At the same time, LG New Energy will accelerate the development of new-generation battery technologies such as all-solid-state batteries and lithium-sulfur batteries. It is worth mentioning that the judgment date of LG Chem and SKI has been delayed repeatedly. At present, the total number of the two parties involved has exceeded 10. Industry insiders familiar with batteries said that LG Chem should eliminate the risks as soon as possible to ensure that the new company obtains investment funds.