Partial division of the former parts business… Established a corporation with KRW 1 trillion in next July
1000 employees move to a joint venture… Electric vehicle powertrain production
Visitors who visited the Korea Electronics Show (KES2020), which opened at COEX in Samseong-dong, Seoul, on the 9th, board a concept car introduced by LG Electronics and look inside the vehicle. Reporter Eun-gu Kang [email protected]
LG Electronics established a joint venture with Magna, Canada, the world’s third-largest auto parts maker, and entered the future automobile market in earnest. It is a paved stone to dominate the powertrain market, which is the core of autonomous driving and electric vehicles. In the market, the joint venture is highly likely to supply electric vehicle motors to Apple’s next-generation electric vehicles.
LG Electronics held an extraordinary board meeting on the 23rd and decided on an agenda to establish a joint venture with Magna, LG Magna e Powertrain (tentative name), by dividing part of the green business within the automotive parts (VS) division. The total investment amount is 925 million dollars (about 1.24 trillion won). The joint venture plans to produce electric vehicle motors, electric vehicle inverters, and electric driving systems in Incheon and Nanjing, China. When the material division and establishment of a joint venture are approved at the general shareholders’ meeting in March next year, the joint venture will be officially launched in July. About 1,000 employees in related business fields move to a joint venture.
With this, LG Electronics will secure a portfolio covering all fields in the automotive electronics (electronic equipment) business. The electric vehicle powertrain will be a new joint venture, and the vehicle infotainment system will be handled by the VS headquarters. The automotive lamp business is dedicated to the Austrian company ZKW acquired in August 2018. An LG Electronics official said, “The goal of the joint venture is to combine Magna’s automotive parts technology with LG Electronics’ mass production know-how,” and “We are looking forward to new orders from various customers including Magna.” Synergy effects with other LG affiliates are also expected. LG Chem is the global leader in the electric vehicle battery market. LG Display and LG Innotek are also prominent in the automotive display and electronic parts market.
On this day, LG Electronics’ share price rose to 100,000 won in 2 years and 7 months, closing at 119500 won, soaring to the price limit (29.61%). Stocks of affiliates such as LG Co., Ltd. and LG Innotek LG Display also surged.
“Battery and powertrain also ranked first”… LG,’acceleration’ to target electric parts
LG Electronics joins hands with Magna to expand electronic equipment business
The electric equipment (automotive electronic equipment) business was one of LG Electronics”sick fingers’. It was in 2013 that LG Electronics entered the electronics business. After acquiring V-ENS, an automobile parts design engineering company, the automobile parts (VS) business headquarters was established, but the results were poor. From 2016 to this year, it recorded a deficit for four consecutive years, and was even treated as’Gyereuk’.
The final puzzle of the LG electronics business
Even in the third quarter, when the H&A division in charge of household appliances and the HE division in charge of TV produced’surprising results’, the VS division, which produces auto parts, has not escaped’minus’. The sales were not small at 1.655.4 billion won, but the operating loss reached 66.2 billion won. The apparent reason was that global automakers did not operate properly due to the novel coronavirus infection (Corona 19). In the industry, it was analyzed whether the image of’battlefield = LG Electronics’ could not be established.
The establishment of a powertrain joint venture with Canada’s Magna International is evaluated as a’mystery’ that will blow away LG Electronics’ concerns. This is because it can attract Magna, the world’s third-largest auto parts maker, to its customers. Automakers that have a relationship with Magna also have an opportunity to sell LG products. It is also expected to help fill the technological gap caused by the lack of business in the auto parts field. LG Electronics will take the initiative in the joint venture. LG Electronics owns 51% of the new corporation and Magna holds 49%.
An automobile industry official said, “LG Electronics’ electronic equipment business was large enough to reach 60 trillion won in order balance, but there was a limit to the bargaining power with customers due to its short workforce.” I will overcome.”
Magna also has a lot to gain through cooperation with LG Electronics. LG Electronics has considerable know-how in mass production and supply chain management accumulated in the home appliance field. He knows the know-how better than anyone else to quickly equip an economy of scale. The strong electric vehicle business portfolio of LG affiliates is another background for Magna to consider LG Electronics as a partner. LG Energy Solutions is the global leader in the electric vehicle battery market. LG Display is also supplying POLED (plastic organic light emitting diode) displays for vehicles to Mercedes and BMW. LG Innotek is also prominent in the automotive LED lamp market.
The goal is to establish an early mass production system
The prerequisite for the electric vehicle powertrain joint venture with Magna is the early establishment of a mass production system. According to market researcher IHS Markit, the global eco-friendly vehicle market is expected to grow from 13.3 million units this year to 56.6 million units by 2025. Nevertheless, there is still no leader in the electric vehicle powertrain market. It is common for major automakers to individually order parts to manufacture powertrains. The industry observes that if a mass production system can be established and the manufacturing cost can be reduced preemptively, it is possible to preempt the market.
It is also expected that information technology (IT) companies that have been researching autonomous driving technology are jumping into the automotive market. Apple recently announced that it will enter the electric vehicle market with its self-driving technology applied. China’s Baidu is also considering direct production of electric and self-driving cars. An industry insider said, “Companies such as Apple and Baidu need to build a supply chain from now on,” and said, “For Magna, a new market will be opened.”
In the market, it is predicted that Magna will become a’Foxcone in the autonomous vehicle market’ if it receives a drop from Apple. This is because it has the capability to produce small cars by receiving orders from Audi and BMW. If this scenario becomes a reality, it is highly likely that newly established joint ventures will be included in Apple’s supply chain.
The analysis that LG Group will generously pour out the group’s resources into the joint venture is also showing strength. This is because Gu Kwang-mo, chairman of LG Group (pictured), has a lot of attachment to the electric vehicle business. At the first general shareholders’ meeting after taking office in March 2019, Chairman Koo emphasized, “We will prepare for the future of LG with the three pillars of electronics, chemistry, and communications.”
Reporter Song Hyung-seok/Lee Soo-bin [email protected]