LG Electronics announces joint venture for EV parts

Industry

Published: 23 Dec. 2020, 18:28 Updated: 29 Dec. 2020, 23:15

LG Electronics announces joint venture for EV parts

An image released to promote a joint venture between LG Electronics and Magna. [LG ELECTRONICS]

LG Electronics will establish a $1 billion joint venture with Canadian automotive supplier Magna International, the company said on Wednesday, a major bet on the automotive parts business for electric vehicles (EVs).

Shares of LG Electronics hit the daily limit after the announcement, and also reached an all-time high to close at 119,500 won ($108), up 29.61 percent from the previous trading day.

LG said that the new company, tentatively named LG Magna e-Powertrain, will produce key components for EV powertrain systems such as motors, inverters and onboard chargers with an official launch set for next July.

Powertrain refers to the combined set of components that generate power required to move a vehicle.

In setting up the joint venture, LG will spin off its unit responsible for making parts for EVs.

The Canadian company will purchase a 49 percent stake in the spun-off unit for $453 million, leaving LG with 51 percent.

The venture will be headquartered in Incheon, Gyeonggi, with more than 1,000 workers.

LG will bring its expertise in manufacturing components while Magna excels at connecting them to work together.

“LG will help accelerate Magna’s time to market and scale of manufacturing for electrification components, while software and systems integration are competencies that Magna brings to this venture,” the electronics company said in a statement.

“This partnership fully aligns with our strategy of being at the forefront of electrification and supporting automakers with a diverse and world-class portfolio,” said Magna’s incoming CEO Swamy Kotagiri.

“By combining our strengths, we expect to gain investment efficiency and speed to market with synergies to achieve more," Kotagiri said, "all the while continuing to capitalize on the acceleration of the electrified powertrain market.”

The chief of the automotive business at LG echoed those expectations for growth in the EV industry.

“Manufacturers need to be disruptive to maintain leadership positions in electrification and, through this deal, LG is entering a new phase in its automotive components business, a growth opportunity with enormous potential,” said Kim Jin-yong, president of the LG Electronics Vehicle Component Solutions Company.

Magna is the world’s third largest automotive component supplier, whose customers include General Motors, Ford Motor Company, BMW, Mercedes, Volkswagen and Tesla Motors.

LG supplied electric vehicle components for the Chevrolet Bolt EV and Jaguar I-PACE.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]