Gu Kwang-mo’s number of matches… LG’s’World’s 3rd largest Magna’ joins hands to capture the EV parts market

Input 2020.12.23 14:14 | Revision 2020.12.23 14:50

July Established’LG Magna E-Powertrain’, a joint venture with Magna
LG’s core parts for powertrains, and Magna’s design and production’economy of scale’
VS Division-ZKW-LG Magna LG to speed up its component business with three axes

LG Electronics (066570)Will establish a joint venture in the field of electric vehicle powertrain (power transmission system) with Magna International (hereinafter referred to as Magna), the world’s third-largest Canadian auto parts manufacturer. Accordingly, it is evaluated that the three auto parts business of LG Electronics has been completed under the system of LG Group chairman Gu Kwang-mo.

LG Electronics held an extraordinary board meeting on the 23rd and announced that it has decided to split the material and establish a joint venture for some of the green business in the VS (Vehicle Components Solutions) headquarters.

Magna and Electric Vehicle Power, which possesses the capabilities of powertrain design, production, and global customer network by physically dividing drive systems (modular products with motors, inverters, and reducers) as well as motors, inverters, vehicle chargers, which are key components for electric vehicle powertrain The main goal is to establish’LG Magna e-Powertrain Co., Ltd’ (tentative name), a joint venture in the train field.

First of all, the establishment of a joint venture will be promoted by LG Electronics holding 100% of the new company’s stake through the physical split, and Magna taking over 49% of the company’s shares (51% of LG Electronics). Magna’s stake acquisition amount is 453 million dollars (about 501.6 billion won).

Founded in 1957, Magna is leading the global auto parts market by producing various auto parts, such as chassis, interior and exterior parts, in addition to power trains, and supplying them to automakers. It is ranked third in the world in the auto parts market by sales last year. Its headquarters are in Ontario, Canada.

Magna is also known to have discussed Apple car production with Apple in the past. Jaguar’s first electric sports utility vehicle (SUV) I-Pace is currently being commissioned at the Austrian plant.

The joint venture will be officially launched around July when approval for the physical division and establishment of a joint venture is approved at the general shareholders’ meeting scheduled for March next year. The established capital is 30 billion won. The headquarters of the joint venture is established in Incheon. About 1,000 employees related to LG Electronics are planning to move to a joint venture.

An official from LG Electronics said, “As the trend of automobile electrification is rapidly progressing in the global market, a joint venture with Magna was established to increase business competitiveness and growth potential by establishing a mass-production system that can enjoy economies of scale. “We agreed to do it together.”

Swamy Kotagiri, the next CEO (CEO) of Magna, said, “We are working with LG Electronics on Magna’s strategy to build a world-class portfolio for automakers while leading the powertrain market.” “We will take advantage of our strengths to take the lead in the rapidly rising electrification parts market.”

In the industry, it is evaluated that LG Electronics has begun to move quickly to respond to the rapidly growing eco-friendly automobile market such as electric vehicles.

LG Electronics established the VS Business Headquarters (then VC Business Headquarters) in 2013 to foster the auto parts business as a future growth engine and cash cow. In August 2018, it also acquired ZKW, an Austrian automotive premium headlamp company. ZKW has the technology to mass-produce premium headlamps equipped with next-generation light sources such as high-brightness LED (light-emitting diode) daytime running lamps and laser headlamps for the first time in the world. It supplies premium headlamps to premium automakers such as BMW, Benz, Audi, and Porsche. It is ranked 5th in the world in the premium headlamp market by production volume. At the end of 2019, LG Electronics transferred the vehicle lamp business within the VS business division to ZKW and integrated it.

Starting from the launch of the joint venture, LG Electronics plans to promote the auto parts business by dividing it into three axes: VS business headquarters (focus on infotainment), ZKW (lamp), and LG Magna e-powertrain (powertrain). All of these results are added to the VS division’s consolidated sales and operating profit.

According to market research firm IHS Markit, the eco-friendly automobile market, which is 13.3 million units this year, is expected to grow more than four times to 56.6 million units in 2025, five years later.