LG Electronics Inc. Considers a New Joint Venture with Canada's Magna International Inc.

LG Electronics Inc. is planning to spin off some of its electric-car elements business into a new joint venture with Canada’s Magna International Inc. In an exchange filing, the South Korean company stated that Magna would purchase 49% shares in the new unit for 501.6 billion won ($453 million) while the rest will be preserved for LG Electronics. People familiar with the matter said earlier that the joint investment would make e-motors, inverters, and electric-drive systems in manufacturers in Incheon in Korea and Nanjing in China.

Stakes in LG Electronics rose by the 30 percent daily limit, their highest gain to ever been recorded. The largest shareholder for the company, LG Corp., advanced 10%, the most from March. Automotive suppliers worldwide are increasingly placing themselves to take advantage of the advancements in electric cars. A combination of stiffer measures on gasoline-powered cars, auspicious government rules, and enhancements in battery technology has led to more automakers speeding up the electrification process. The change has also ignited a rally in shares of market leader Tesla Inc. together with Chinese startups Nio Inc. and XPeng Inc.

Jeon Kyung-Dae, chief investment officer for equities at Macquarie Investment Management Korea in Seoul, stated that LG Electronics was becoming a new substitute to Tesla stock. The company is “known as a leader in electronics parts and may produce electric cars based on an original equipment manufacturer model, rather than establishing its own EV brand.” The new company, which is temporarily named LG Magna e-Powertrain, will service orders from Magna together with its clients. EV components being directed to the joint venture comprises of LG Electronics’ battery heater unit along with its power relay assembly division.

In a joint media release, the companies said that the market for e-motors, inverters, and electric-drive systems was anticipated to have remarkable growth between now and 2030. The JV would aim at the fast-growing global market with a world-class portfolio. They also stated that LG would assist in accelerating Magna’s time to market and scale manufacturing for electrification components, even as software and systems incorporation are capabilities that Magna brought to the venture. The tie-up is the second major investment in LG Electronics in the auto industry following the purchase of automotive-lighting and headlight-systems provider ZKW Group GmbH in 2018 for around 1.1 billion euros ($1.3 billion).

On December 1, one more LG group company, LG Chem Ltd., closed its energy-storage and EV-battery business to establish LG Energy Solution Co. The most recent undertaking will also have a software R&D center in Troy, Michigan. LG Magna e-Powertrain will consist of more than 1,000 employees situated at LG areas in the U.S., South Korea and China. On December 7, Bloomberg Intelligence analysts Kevin Tynan and Andreas Krohn noted Magna, together with different suppliers in the $1 trillion auto parts industry that are deeply entangled in advanced technologies, maybe in a bind as large automakers in Europe and China transition to low-volume EV sales.



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