LG Electronics and automobile supplier Magna International recently announced plans to co-found a $1 billion electric car parts supplier. The joint venture, tentatively called LG Magna e-Powertrain, will be supported by a staff made up of 1,000 LG employees based in the United States, South Korea, and China.
The new company will focus on manufacturing electric motors, power inverters, and onboard charging systems.
Details on the Formation of LG Magna e-Powertrain
LG and Magna created a joint venture to capitalize on the global vehicle electrification trend. As it happens, the two corporations are well-positioned to take advantage of the worldwide automotive industry trend.
The South Korean conglomerate established a division to break into the personal transport parts supply business in 2013. The unit expanded its offerings by absorbing Austrian light-emitting diode (LED) headlamp provider, ZKW, five years later. LG’s efforts paid off in the form of electric vehicle (EV) parts supply contracts with Chevrolet and Jaguar.
Magna currently ranks as the world’s third-largest automobile component vendor behind Bosch and Denso. In 2019, the Canadian company generated $39.43 billion in revenue and had recently focused on developing groundbreaking autonomous mobility solutions. In fact, it recently introduced a new advanced driver-assistance system (ADAS) that utilizes image-processing technology developed by Intel’s Mobileye subsidiary.
Because of their shared interests and compatible resources, the firms founding a joint venture together is a no-brainer.
LG Magna e-Powertrain will be headquartered in Incheon, South Korea, and, pending shareholder approval, will officially launch this July. The electronics conglomerate will own 51 percent of the business, while the automotive supplier will hold a 49 percent stake.
A Much Needed Shot in the Arm
For LG, the joint venture with Magna represents a shot in the arm for its struggled vehicle components division.
On the one hand, the unit secured contracts to provide parts for the Chevy Bolt and the Jaguar I-Pace. But on the other, it has posted a loss for four 19 consecutive quarters. The coronavirus pandemic prompting widespread shutdowns throughout the global automotive sector likely exacerbated the subsidiary’s problems.
However, LG expects its auto parts division to return to profitability by the third quarter of 2021. The corporation likely hopes to ride the EV sector growth wave to renewed financial success. MarketsandMarkets predicted the battery-powered transport component market would reach $157.7 billion by 2025, up from $22.2 billion in 2018.
The segment will probably continue expanding past the forecast period because of the environmental protector priorities of various countries. For example, Britain has committed to producing zero net greenhouse gas emissions by 2035. California and Québec will bar the sale of new fossil fuel-powered personal transports that same year. European Union leaders also pledged to cut the blocks CO2 emissions by 55 percent by 2030.
In addition, China has seen a spike in EV sales in recent months due to a raft of government consumer subsidies. Beijing created the program as part of a larger initiative to phase out gasoline vehicle production by 2035.
Ideally, LG Magna will generate substantial revenue going forward as the world’s largest auto markets embrace personal transport electrification. The joint venture’s strong performance will push LG’s car parts division back into the black.