US production credit supplies 55% of LG Energy Solution's surprise quarterly profit

Take the third quarter out of the year to date and the first half of 2026 was an operating loss of 94.4 billion won ^[15]. Nine-month operating profit came to 661.6 billion won, down 54.9% from 1.46 trillion won a year earlier ^[13]. The July-September quarter alone booked 756 billion won ^[1]. Sales over the same nine months rose 26.1% to 23.76 trillion won ^[14].

The quarter splits in two, or rather three once the analysts' account is added. The Advanced Manufacturing Production Credit under the US Inflation Reduction Act, earned on LGES's battery production in the United States, contributed 416.9 billion won ^{[4] [3]}, or 55% of operating profit ^[18]. Without it the company would have earned 339.1 billion won ^[3]. On sales of 9.64 trillion won ^[5], the operating margin is 3.5% before the credit and 7.8% after it ^[16]. A year earlier LGES earned 601.3 billion won on 6.06 trillion won of sales ^{[2] [5]}, a 9.9% margin ^[17].

The third piece sits inside the 339.1 billion won. Analysts cited by Channel NewsAsia attributed the beat over LSEG's SmartEstimate of 309 billion won ^[11], a gap of 447 billion won ^[19], to a one-off payment from a North American automaker that fell short of its minimum purchase commitments amid weak EV demand ^[6]. The size of the payment was not reported. If it exceeds 339.1 billion won, about 76% of the beat ^[20], LGES lost money on the batteries it actually delivered and took its whole profit from a tax credit and a customer's shortfall. The automaker, for its part, paid compensation for cells it did not buy ^[6].

Two readings fit the record. In one, the payment is large and the business before credits sits near breakeven, consistent with the first-half loss ^[15]. In the other, the payment is modest and the profit came from the products the company names. "Increased ESS shipments to North American markets and mid- and low-priced pouch-type battery sales to Europe helped boost the bottom line despite a prolonged slowdown in the electric vehicle (EV) sector," a company spokesperson said ^[8]. Quarterly sales grew by 3.58 trillion won in a year ^[12]. That growth is the strongest evidence for the second reading.

I think the first is closer. The analysts tied the beat to the payment ^[6]. LGES is expanding its ESS business to offset EV weakness, with demand supported by power needs at AI data centres ^[9]. The same analysts say that business is still loss-making and its turnaround has been pushed back ^[10]. If storage loses money, the spokesperson's two drivers come down to one: cheaper pouch cells sold into Europe ^[8]. The view is wrong if the payment proves to be a small part of the 339.1 billion won, because then most of a 3.5% pre-credit margin came from selling batteries ^[16].