Koo Kwang-mo's Bold Move in Electric Vehicle Parts, Targeting 1 Trillion KRW Sales for Magna JV in 2023

Magna, the World's 3rd Largest Auto Parts Supplier, Establishes Electric Vehicle Parts Joint Venture
LG Electronics to Expand Automotive Components Business as New Growth Engine for the Group
Expectations for Future Parts Supply to Apple Electric Vehicles

Koo Kwang-mo, Chairman of LG Group
Photo by Yonhap News

[Asia Economy Reporter Changhwan Lee] Koo Kwang-mo, chairman of LG Group, has made a bold move to expand the automotive electronic components business. The goal is to grow LG Electronics' automotive electronics business by collaborating with the world's third-largest auto parts manufacturer and establish it as a new growth engine for the group following secondary batteries.

The joint venture (JV) aims to turn profitable in 2022 and achieve sales of 1 trillion KRW by 2023. There are also market speculations that it could collaborate with Apple, which has entered the electric vehicle business.

The automotive electronics business as another new growth engine following batteries

LG Electronics announced on the 24th that it expects the automotive electronics business to quickly turn around once the JV with Magna International (Magna) in the electric vehicle powertrain sector is established.

Based on the new company, LG Electronics' automotive electronics sales are expected to grow from 143.3 billion KRW last year to 250 billion KRW this year, 500 billion KRW next year, and reach 1 trillion KRW by 2023.

The break-even point is expected in 2022, and from 2023, the market anticipates an operating profit exceeding 50 billion KRW annually. If the new company grows rapidly, the VS Business Division is also expected to turn profitable by the year after next.

Industry insiders evaluate this joint venture as a result strongly reflecting Chairman Koo Kwang-mo's determination to make LG Electronics' automotive electronics business a new growth engine for the group, following LG Chem's electric vehicle batteries.

Since his inauguration in 2018, Chairman Koo has identified electric vehicle-related businesses as the group's future growth drivers and has expanded investments accordingly. Earlier this month, LG Chem spun off its battery business to establish LG Energy Solution, aiming to grow its battery business, which is part of this background.

Currently, LG Group is transforming into a comprehensive automotive electronics company through key affiliates such as LG Energy Solution, LG Electronics, and LG Innotek, covering everything from electric vehicle batteries to vehicle infotainment, powertrain, and vehicle communication and lighting components.

The slower-than-expected growth of LG Electronics' automotive electronics business is a major reason for establishing this JV. LG Electronics officially entered the automotive parts sector in May 2013 by acquiring V-ENS, an automotive parts design engineering company, and established the VS Business Division (then VC Business Division) in July of the same year.

In August 2018, it also acquired ZKW, an Austrian premium automotive headlamp company. ZKW possesses the technology to mass-produce premium headlamps equipped with next-generation light sources such as high-intensity LED daytime running lamps and laser headlamps, a world first.

Nevertheless, LG Electronics' automotive electronics business has been struggling with losses from 2016 through this year. The VS Business Division, along with the MC Business Division responsible for mobile phones, is considered one of LG Electronics' representative loss-making divisions.

LG Electronics expects synergy in the automotive electronics business to increase by completing three pillars: the VS Business Division focused on vehicle infotainment, ZKW for lamp business, and LG Magna e-Powertrain centered on powertrain.

Kim Jin-yong, head of LG Electronics' VS Business Division, said, "The JV will actively utilize LG Electronics' outstanding manufacturing technology, Magna's abundant experience, and global customer network to lead the upcoming electric vehicle era and enhance the competitiveness of both companies' automotive parts businesses."

LG Electronics Drive Motor

Business synergy with Apple electric vehicles also expected

The market also expects that electric vehicle motors and inverters produced by LG Magna e-Powertrain are likely to be supplied to Apple's electric vehicles.

This is because Magna was a key partner in Apple's 'Titan Project,' launched in 2014 as Apple prepared to enter the electric vehicle business. U.S. media reported on the 21st that Apple plans to produce autonomous vehicles equipped with self-designed electric vehicle batteries by 2024.

Chulhee Cho, a researcher at Korea Investment & Securities, emphasized, "According to foreign media reports, Magna is currently mentioned as Apple's electric vehicle business partner. Synergies in sales are also expected indirectly through the new company with the existing automotive electronics division (infotainment and other electric vehicle parts, etc.)."

This content was produced with the assistance of AI translation services.