Industry
South Korea-based LG Electronics Inc. and car supplier Magna International Inc. are launching a joint venture that will make key parts for electric cars, the companies announced Wednesday.
PHOTO FILE – Attendees attendant passing by LG Electronics booth at the 2009 International Consumer Electronics Show (CES) in Las Vegas, Nevada, January 9, 2009. REUTERS / Steve Marcus / File Photo
TORONTO / SEOUL: South Korea-based LG Electronics Inc and car supplier Magna International Inc are launching a joint venture that will make key parts for electric cars, the companies announced Wednesday.
The joint venture, called LG Magna e-Powertrain and valued at US $ 1 billion, manufactures e-motors, inverters and onboard chargers, according to LG Electronics.
The agreement extends a wave of consolidation among suppliers aiming to capture a growing market for electric vehicles, e-axle systems, which combine electric motors, power controls and drive gears in one unit. Earlier this year, gear maker BorgWarner Inc acquired rival Delphi, and Japanese manufacturers Aisin Seiki Corp, Denso Corp and Toyota Motor Corp have created a new e-axle venture called the BluE Nexus.
Shares of LG Electronics jumped as much as 24.7per percent to 0358 GMT to the highest level since 2011, compared to KOSPI’s 1per percent increase in the broader market.
LG Electronics is connected to South Korea’s fourth-largest conglomerate, with interests ranging from electronics, including smartphones, to home appliances. LG Group’s key affiliates include LG Display Co Ltd, which counts Apple Inc as its customer, as well as LG Chem Ltd, which has a wholly owned subsidiary LG Energy Solution. is supplying EV batteries to Tesla Inc.
LG will have 51per percent of the new company and Magna will have 49per percent, LG said.
The business is expected to close in July 2021 pending LG’s shareholder approval, among other conditions, and will employ 1,000 people at LG’s facilities in the United States, Seoul and China, according to a press release.
LG has supplied GM’s Bolt EV with motors, battery packs and other components.
Magna is already making electronic vehicle gear for companies including Volkswagen. But gaining more control over the production of the high-value parts of an electric car “has always been part of the strategy as we move forward,” Magna’s new CEO Swamy Kotagiri said in interview with Reuters Tuesday ahead of the news.
“By working together the two companies I think we can deal not only with our future, but with our key audiences and, preferably, the new entrances. who are looking for electric platforms, “he said.
LG Electronics ’automotive components solutions industry has reported 19 quarters of ongoing losses.
When asked about the turnaround timeline of their Vehicle Component Solutions business during an employment call in October, the company said LG Electronics expects to move to profit in the third quarter of next year.
Sales from this industry were US $ 150 million in 2019, but Kotagiri said it expects a complex annual growth rate of around 50per percent by 2025.
(Reporting by Moira Warburton in Toronto, Heekyong Yang & Joyce Lee in Seoul, and Nori Shirouzu in Beijing; Editing by Dan Grebler)