Tesla Supplier Reports Profit Rise Amid Slowing EV Demand in Europe

Summary

  • The auto parts supplier for Tesla (NASDAQ:), GM, and Volkswagen (ETR:) announced an operating profit of 338 billion won ($252.40 million) for the October-December period, an increase from 237 billion won from the prior year.
  • The profit aligns with the company’s already projected estimate and surpasses a 298 billion won estimate by LSEG SmartEstimate, taking into consideration analysts with a history of accuracy.
  • Nevertheless, the fourth quarter profit plunged significantly by more than half on a quarterly basis due to a drop in electric vehicle (EV) demand in Europe.
  • Key risk factors this year could include a change in EV transition plans by automakers, increasing competition in Europe, and political uncertainty such as the U.S. presidential election.
  • Revenue for the quarter fell year-on-year by 6.3% to 8 trillion won.

Company Performance in Detail

The company supplying parts to automakers such as Tesla (NASDAQ:), GM, and Volkswagen (ETR:), saw its operating profit rise to 338 billion won ($252.40 million) for the October-December quarter, a significant increase from 237 billion won recorded in the same period a year ago. The profit is in sync with their earlier this month estimation of 338 billion won, but surpassed the LSEG SmartEstimate of 298 billion won, which leans toward analysts with more consistent accuracy.

Slowdown in Global EV Battery Demand Growth

However, the fourth-quarter profit was more than halved compared to the prior quarter, owing to weak demand for electric vehicles (EV) in Europe. The company reported: “A temporary slowdown of global EV battery demand growth is expected due to original equipment manufacturers’ (OEMs’) conservative inventory control along with continued metal price decline.” Here, the term OEMs pertains to automakers.

Factors of Risk and Uncertainty

Changing EV transition plans by automakers, growing competition in Europe, and political uncertainties, including the U.S. presidential election, are predicted as potential risk factors this year. This forecast follows the warning from customer Tesla on Wednesday of a sharp slowdown this year in sales growth.

Decline in Revenue

Revenue for the quarter suffered a year-on-year fall by 6.3% to 8 trillion won.

Trading Update

In the wake of the quarterly results, shares of the company were trading up 2.6% in the morning trade, compared with a rise of 0.4% in the benchmark. ($1=1,339.1500 won)

The fluctuation in company profits can impact the forex or trading landscape, specifically affecting assets related to electric vehicle companies like Tesla, GM and Volkswagen.

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