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Investing.com -- UBS upgraded LG Energy Solution to Buy, saying U.S. policy support and trade barriers will hand Korean battery makers a dominant share of the fast-growing energy storage system (ESS) market.
The broker said the One Big Beautiful Bill Act, or OBBBA, offers a $45 per kilowatt-hour production tax credit and investment tax credits, while also limiting Chinese content in supply chains.
A planned 58% tariff on Chinese ESS batteries, up from 41% now, further strengthens the case for U.S.-based suppliers.
“Evolving and complex U.S. policy led to investors’ undervaluing the ESS opportunity. We distil U.S. policy into a differentiated view: Korean battery makers’ U.S. ESS market share to rise from on local sourcing incentives and curbed Chinese imports,” UBS wrote.
“We upgrade LGES to Buy on U.S. LFP ESS first-mover edge”
LGES has an 18-month lead in lithium iron phosphate (LFP) ESS production, with 17 GWh of U.S. capacity that is set to rise to 50 GWh by 2027.
The company recently signed a $4 billion supply deal with Tesla, pushing its order book close to 90 GWh. UBS forecasts LGES’s U.S. market share climbing from 6% in 2025 to nearly half by 2030, with operating margins of about 30%.
Whereas UBS was bearish on Korean cathode makers, which it kept at Sell.
“Korean cathode makers are unlikely to benefit due to lack of LFP production and heavy capex needs,” analysts at UBS said.
The broker added that policy allowances for some Chinese-linked supply could weigh on cathode makers.
Meanwhile, Korean battery stocks still trade below their historical average, suggesting upside, while cathode makers are valued above average despite lagging in LFP development.
“LGES with its 90 GWh order book and 18-month head start make it our top pick,” UBS said.