South Korean multinational electronics company LG Electronics Inc, has joined forces with American mobility technology company Magna International Inc, for manufacturing key components for electric cars to support the global shift toward vehicle electrification.
As per sources, the joint venture is tentatively called LG Magna e-Powertrain and valued at $1 billion. The new company will make use of Magna’s experience in electric powertrain systems along with LG’s expertise in component development for e-motors and inverters.
The agreement comes in line with the aim of companies to benefit from the growing market for electric vehicles, e-axle systems, which combine electric motors, power controls and driving gears in one unit.
Shares of LG Electronics jumped as much as 24.7 percent to their highest since 2011, compared to the broader market Korea Composite Stock Price Index’s (KOSPI) 1 percent rise.
Under the agreement, the two companies can continue expanding their electric powertrain product offerings and global footprints. The market for e-motors, inverters and electric drive systems is projected to see a notable growth between 2020 and 2030 across the world.
The transaction is expected to complete by 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. LG will have 51 percent of ownership in the new company and Magna will own 49 percent, according to the company’s statement.
LG has previously supplied motors, battery packs and other components to GM’S Bolt electronic vehicle. Magna already makes electronic vehicle gear for companies including Volkswagen.
“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,” Magna’s incoming CEO, Swamy Kotagiri, stated.
Dr. Kim Jin-yong, President of the LG Electronics Vehicle Component Solutions Company says that, “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.”
LG Electronics’ vehicle component solutions business has posted 19 quarters of losses and expects to get back to profit swing by the third quarter of next year.
Canada-headquartered Magna is a mobility technology company with over 344 manufacturing operations and 93 product development, engineering and sales centers in 27 countries. The company mainly focuses on the production of automobile body, chassis, exterior, seating, powertrain, active driver assistance, electronics, mechatronics, mirrors, lighting and roof systems.
LG Electronics is an affiliate of South Korea’s fourth-largest conglomerate, with its presence in the broader electronics market from 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.