LG and Magna announce billion dollar joint venture in electric car gear | Tech News

LG and Magna announce billion dollar joint venture in electric car gear

The joint venture, tentatively called LG Magna e-Powertrain and valued at $1 billion, will manufacture e-motors, inverters and onboard chargers. 

By:REUTERS
| Updated on: Aug 21 2022, 13:47 IST
Visitors walk past the showroom of LG Electronics during the Auto China 2016 show in Beijing, China April 26, 2016. REUTERS/Kim Kyung-Hoon/File Photo
Visitors walk past the showroom of LG Electronics during the Auto China 2016 show in Beijing, China April 26, 2016. REUTERS/Kim Kyung-Hoon/File Photo (REUTERS)

South Korea-based LG Electronics Inc and automotive supplier Magna International Inc are launching a joint venture that will make key components for electric cars, the companies announced on Wednesday.

The joint venture, tentatively called LG Magna e-Powertrain and valued at $1 billion, will manufacture e-motors, inverters and onboard chargers, according to LG Electronics.

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The deal expands a wave of consolidation among suppliers aiming to capture a growing market for electric vehicle, e-axle systems, which combine electric motors, power controls and driving gears in one unit. Earlier this year, gear maker BorgWarner Inc acquired rival Delphi, and Japanese manufacturers Aisin Seiki Corp, Denso Corp and Toyota Motor Corp have created a new e-axle venture called BluE Nexus.

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Shares of LG Electronics jumped as much as 24.7% as of 0358 GMT to their highest since 2011, compared to the broader market KOSPI's 1% rise.

LG Electronics is an affiliate of South Korea's fourth-largest conglomerate, with interests ranging from electronics, including smartphones, to home appliances. LG Group's major affiliates include LG Display Co Ltd, which counts Apple Inc as its customer, as well as LG Chem Ltd, whose wholly owned LG Energy Solution subsidiary provides EV batteries to Tesla Inc.

LG will own 51% of the new company and Magna will own 49%, LG said.

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The transaction is expected to close in July 2021 pending LG shareholder approval, among other conditions, and will employ 1,000 people at LG locations in the United States, Seoul and China, according to a press release.

LG has previously supplied motors, battery packs and other components to GM'S Bolt EV.

Magna already makes electronic vehicle gear for companies including Volkswagen. But gaining more control over production of the high-value parts of an electric car "has always been part of the strategy as we move forward," Magna's incoming CEO, Swamy Kotagiri said in an interview with Reuters on Tuesday ahead of the announcement.

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"With combined synergies of both companies together I think we'll be able to address not only our existing customers, but all the major audiences and preferably the new entrances looking for electric platforms," he said.

LG Electronics' vehicle component solutions business has reported 19 quarters of consecutive losses.

When asked about the timeline of its Vehicle Component Solutions business' turnaround during an earnings call in October, the company said LG Electronics expects to swing to profit in the third quarter of next year.

Sales from this business were $150 million in 2019, but Kotagiri said he expects a compound annual growth rate of around 50% by 2025.

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First Published Date: 23 Dec, 22:20 IST
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