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LG and Magna announce US$1 billion joint venture in electric car gear

LG and Magna announce US$1 billion joint venture in electric car gear

FILE PHOTO - A show attendee passes by the LG Electronics booth during the 2009 International Consumer Electronics Show (CES) in Las Vegas, Nevada, Jan 9, 2009. (Photo: REUTERS/Steve Marcus/File Photo)

SEOUL: South Korea-based LG Electronics and automotive supplier Magna International are launching a joint venture that will make key components for electric cars, the companies announced on Wednesday (Dec 23).

The joint venture, tentatively called LG Magna e-Powertrain and valued at US$1 billion, will manufacture e-motors, inverters and onboard chargers, according to LG Electronics.

The deal expands a wave of consolidation among suppliers aiming to capture a growing market for electric vehicle, e-axle systems, which combine electric motors, power controls and driving gears in one unit. Earlier this year, gear maker BorgWarner acquired rival Delphi, and Japanese manufacturers Aisin Seiki, Denso and Toyota Motor have created a new e-axle venture called BluE Nexus.

Shares of LG Electronics jumped as much as 24.7 per cent as of 0358 GMT to their highest since 2011, compared to the broader market KOSPI's 1 per cent rise.

LG Electronics is an affiliate of South Korea's fourth-largest conglomerate, with interests ranging from electronics, including smartphones, to home appliances. LG Group's major affiliates include LG Display, which counts Apple as its customer, as well as LG Chem, whose wholly owned LG Energy Solution subsidiary provides EV batteries to Tesla.

LG will own 51 per cent of the new company and Magna will own 49 per cent, LG said.

The transaction is expected to close in July 2021 pending LG shareholder approval, among other conditions, and will employ 1,000 people at LG locations in the United States, Seoul and China, according to a press release.

LG has previously supplied motors, battery packs and other components to GM’S Bolt EV.

Magna already makes electronic vehicle gear for companies including Volkswagen. But gaining more control over production of the high-value parts of an electric car "has always been part of the strategy as we move forward," Magna's incoming CEO, Swamy Kotagiri said in an interview with Reuters on Tuesday ahead of the announcement.

"With combined synergies of both companies together I think we'll be able to address not only our existing customers, but all the major audiences and preferably the new entrances looking for electric platforms," he said.

LG Electronics' vehicle component solutions business has reported 19 quarters of consecutive losses.

When asked about the timeline of its Vehicle Component Solutions business' turnaround during an earnings call in October, the company said LG Electronics expects to swing to profit in the third quarter of next year.

Sales from this business were US$150 million in 2019, but Kotagiri said he expects a compound annual growth rate of around 50 per cent by 2025.

Source: Reuters/kv

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