LG spins off its battery business to facilitate large-scale financing in the future.

A few days ago, LG Chem officially announced that it will formally spin off the battery business before the end of 2020 and establish a wholly-owned subsidiary after abolishing the original battery business unit to better develop the battery-related business of the group.

It is reported that the new wholly-owned subsidiary is tentatively named LG Energy Solutions (LG Energy Solutions). Once the resolution is passed, the new wholly-owned subsidiary of LG Chemical will be formally established in December 2020.

Regarding the spin-off of the battery business unit, LG Chem stated that the new company is to cope with the complex and changeable market environment and strengthen the professionalism of the business unit to achieve efficient decision-making and flexible organization and operation, improve management efficiency, and help improve the parent company’s Corporation value.

LG Chem’s battery business has been at a loss. Until this year, due to the growth of overseas demand, the shipments of its Polish factory increased significantly, and the performance began to counterattack. In the second quarter of this year, the South Korean battery giant made a profit of 352 million U.S. dollars, compared with 70 million U.S. dollars last year, an increase of 402.86%. This is mainly due to the sales of Tesla, Renault Zoe, Audi E-tron and other models, all of which use LG Chem’s power batteries.

According to a report published on August 4 by the American professional new energy vehicle website Electrek, Tesla sold 179,000 electric vehicles worldwide in the first half of this year, surpassing the combined sales of electric vehicles by auto giants Renault-Nissan, Volkswagen and BYD. The latter's sales in the first half of the year were approximately 65,500, 64,500 and 46,500 respectively.

At the same time, LG Chem's global market share has increased dramatically. According to a report from South Korea's SNE Research, in the first quarter of this year, LG Chem surpassed Japan's Panasonic and China's Ningde era with 5.5 GWh of installed capacity and became the world's largest battery manufacturer. The company's global market share rose from 10.7% in the first quarter of last year to 27.1% in the first quarter of this year. In July this year, LG Chem's power battery installed market share once again occupied the first place at 26.8%, followed by CATL.

In terms of orders, in July this year, LG Chem stated that it had orders worth 150 trillion won ($125 billion), which would keep it busy for the next five years. It is not difficult to see that LG Chem chose to spin off its existing battery business to establish a wholly-owned independent subsidiary. This is also due to future development considerations. Independent companies are more convenient for future large-scale financing. At the same time, an independent financial structure also helps to relieve the parent company Financial burden.