Gu Kwang-mo’s car, car, car, LG Electronics’ market cap jumped 4.5 trillion won

LG Electronics establishes a joint venture with Canada’s Magna International (Magna), the world’s third-largest auto parts maker. It is interpreted as a willingness to make it a’next-generation food’ by growing the automotive electronics (electronic equipment) business.

LG Electronics announced on the 23rd that it has decided to establish a joint venture (JV)’LG Magna ePowertrain’ (tentative name) with Magna in July of next year. The joint venture of the two companies produces parts of the power transmission system (powertrain) for electric vehicles (EV) such as motors, inverters (devices that control electric vehicle motors) and electric driving systems in Incheon and Nanjing, China.

To this end, LG Electronics is dividing part of the headquarters of the automotive electronics business (VS). Electric vehicle motors, inverters, vehicle chargers, and drive systems. If the stock split is approved at the general shareholders’ meeting in March next year, Magna will take over 49% of the new corporation’s stake (approximately 502 billion won). LG Electronics invests 51% (approximately 518 billion won) in a joint venture with a total value of 925 million dollars (about 1.2 trillion won).

“The joint venture will lead the electric vehicle era by actively utilizing LG Electronics’ outstanding manufacturing technology, Magna’s rich experience, and customer network, as well as enhancing the competitiveness of the auto parts business,” said Kim Jin-yong, vice president of LG Electronics’ VS Business Division Emphasized.

In the industry, while the market for eco-friendly vehicles and electrified parts is growing rapidly, LG Electronics’ electronic component technology and Magna’s engineering capabilities are expected to create synergy. LG Electronics is being recognized for its competitiveness by supplying electric vehicle electronic parts that are mounted on Chevrolet’Volt EV’ and Jaguar’I-PACE’. This year, it has been supplied to GM-affiliated Cadillac, and has been selected as an’excellent supplier of automotive displays in the innovation sector’ by Renault, France.

Above all, it is a field that Gu Kwang-mo, CEO of LG Corp., develops as a major business with batteries. Two years ago, the investment continued, such as acquiring the Austrian automotive lighting company ZKW for 1.4 trillion won.

Magna produces various auto parts such as powertrain, chassis (car skeleton), interior and exterior, and supplies them to Ford, GM, Chrysler, BMW, Volkswagen, etc. It is leading the global automotive parts market based on its engineering capabilities such as integrated system design and verification in the powertrain field. There are also strengths in the autonomous driving sector.

For LG Electronics, through a new joint venture, Magna’s large global automakers can be secured as customers. In addition, LG Electronics can also aim to expand its portfolio of motor and inverter business, which is the core of its competitive electric vehicle powertrain. An official from LG Electronics said, “We can realize economies of scale by increasing new orders for electric equipment and establishing mass production systems early on.” LG Electronics said in October that, “In the electronics business, operating profit is expected to turn to the black starting in the third quarter of next year.”

As Magna discussed the production of’Apple Car’ with Apple in the past, the possibility of winning Apple’s next-generation electric vehicle contract is also discussed. Kim Jin-woo, a researcher at Korea Investment & Securities Co., said, “Magna has a good knowledge in the consignment production of finished cars. Apple may entrust its electric vehicle production to Magna in the future.” He predicted, “Considering the relationship between LG and Apple and Magna, a new joint venture could supply auto parts to Apple cars.”

In the business world, there is also an evaluation that Chairman Kwang-mo Koo made a number of matches to actively respond to the demand for electric vehicles.

With this expectation, LG Electronics’ share price on the day ended at 110,500 won, rising 29.61% from the previous day, soaring to the price limit. LG Electronics’ upper limit is 12 years old. As a result of the increase on that day, the market cap increased by KRW 4.5 trillion, and the market cap ranking jumped from 23rd to 16th in the KOSPI. Stocks of other LG affiliates such as LG Corp. and LG Display also surged one after another.

Reporter Kim Young-min [email protected]