South Korean Battery Makers LG and Samsung SDI Report Margin Squeeze

Price War Erodes Profitability

LG Energy Solution Ltd. and Samsung SDI Co. both reported declining operating margins in their third-quarter results, as Chinese battery manufacturers CATL and BYD aggressively expanded global market share through pricing that South Korean executives described as "unsustainable."

LG Energy Solution posted an operating margin of 4.8%, down from 8.2% a year earlier, on revenue of 8.7 trillion won ($6.5 billion). Samsung SDI reported a margin of 3.6%, compared to 6.1% in Q3 2024, with revenue of 5.2 trillion won.

Chinese Competitors Set the Pace

CATL, the world's largest battery manufacturer, has reduced prices for lithium iron phosphate (LFP) cells to approximately $56 per kilowatt-hour, 25% below LG Energy's comparable offering. BYD's Blade Battery, also based on LFP chemistry, has been quoted at even lower prices for Chinese domestic automakers.

"The cost advantage of Chinese producers is structural, not just cyclical," said James Frith, head of energy storage research at Bloomberg New Energy Finance. "They have vertically integrated supply chains, lower labor costs, and massive scale. Korean producers need to compete on technology differentiation, not price."

Technology Response

LG Energy announced accelerated development of its next-generation solid-state battery program, with a pilot production line at its Ochang facility scheduled to begin operation in 2027. The company said solid-state cells would offer 30% higher energy density and faster charging than current lithium-ion technology, potentially commanding premium pricing from automakers.

Samsung SDI is focusing on prismatic cell design improvements and has secured a $7.2 billion contract to supply batteries for General Motors' Ultium platform through 2030. The company's joint venture factory in Kokomo, Indiana, is on track for production in the first half of 2026.

U.S. Market Provides a Buffer

The Inflation Reduction Act's domestic content requirements have shielded Korean manufacturers from direct Chinese competition in the U.S. market. Batteries produced at LG Energy's plants in Michigan, Ohio, and Georgia, as well as SK Innovation's facilities in Georgia, qualify for IRA tax credits worth up to $45 per kilowatt-hour.

LG Energy's North American operations posted operating margins of approximately 12%, significantly above the company average, reflecting both IRA benefits and higher selling prices negotiated with U.S. automakers.

European Market Pressured

Europe represents a more challenging landscape. The European Union has launched an anti-subsidy investigation into Chinese battery imports, but preliminary duties are not expected before mid-2026. In the interim, Chinese LFP batteries have gained significant ground, particularly with European automakers producing lower-cost EV models.

Volkswagen AG confirmed in November that it would source LFP batteries from CATL's planned Hungarian factory for its entry-level electric models, a decision that analysts said reflected the scale of the pricing gap.

Investor Sentiment

Shares of LG Energy Solution have fallen 24% this year, while Samsung SDI has declined 18%. Both stocks trade near their lowest valuation multiples since their respective listings. SK Innovation, which houses the SK On battery business, has underperformed even more sharply, with a 31% decline.

Analysts at Goldman Sachs maintained a buy rating on LG Energy Solution, arguing that the market has over-discounted near-term margin pressure and that the company's long-term contract backlog of $230 billion provides revenue visibility through the end of the decade.