LG Magna's First Year... LG Electronics Expands Production and Sales in New Automotive Electronics Business

Investment Expansion Despite Semiconductor Shortage and Supply Chain Challenges

Increasing Overseas Production Bases... Sales Also on the Rise

"Enhancing Profitability through Securing New Clients and Stabilizing Mass Production"

Aerial view of the 'LG Magna e-Powertrain' production plant located in Ramos Arizpe, Mexico. (Photo by LG Electronics)

[Asia Economy Reporter Moon Chaeseok] 'LG Magna e-Powertrain,' the ambitious project of LG Electronics' automotive components division, which has emerged as a new growth engine, marked its first anniversary on the 1st. The joint venture created with Magna International, the world's third-largest automotive parts and electronics company based in Canada, is showing rapid growth.

According to industry sources, LG Magna officially launched on July 1 last year following a resolution by LG Electronics' board of directors, when part of the green business within LG Electronics' VS Business Division was spun off as an independent entity. The equity stake is split 51:49 between LG Electronics and Magna. Magna acquired its 49% stake in the joint venture for $453 million (approximately 600 billion KRW). The company manufactures electric vehicle powertrain components such as motors and inverters, modularized drive systems (comprising motors, inverters, and reducers), and onboard vehicle chargers.

LG Magna is rapidly expanding its production bases both domestically and internationally. In April, it began constructing an electric vehicle parts manufacturing plant in Ramos Arizpe, Coahuila, Mexico. By 2023, it plans to establish a production facility with a total floor area of 25,000 square meters and produce key components such as drive motors and inverters to be installed in General Motors (GM)'s next-generation electric vehicles. In addition to the North American base in Mexico, production lines are located in Incheon, South Korea, and Nanjing, China. In May, LG Magna invested 100 billion KRW to expand the Nanjing plant, where it manufactures drive motors and inverters for electric vehicles.

Sales are also increasing. In the six months following its launch until the end of last year, LG Magna recorded sales of approximately 250 billion KRW. In the first quarter of this year, sales reached 120 billion KRW, a roughly 40% increase compared to the same period last year. However, due to initial business costs, the company posted a loss of 26 billion KRW in the first quarter. LG Electronics previously stated in an earnings conference call that LG Magna's sales are expected to grow at an average annual rate of over 50% until 2025. A representative from LG Magna said, "We secured new clients in terms of orders, and despite semiconductor shortages and rising raw material prices, sales are expected to maintain a growth trend this year, improving profitability."

With growth in both production and sales, LG Magna is establishing itself as a core pillar of LG Electronics' automotive components business. LG Electronics has positioned its automotive components business as a future growth engine, focusing on three main pillars: its VS Business Division (vehicle infotainment), subsidiary ZKW (vehicle lamps), and the Magna joint venture (powertrain).

There have been ongoing possibilities of LG Magna collaborating on Apple's autonomous electric vehicle project, the 'Apple Car.' Swami Kotagiri, CEO of Magna International, previously stated, "We are ready to manufacture the Apple Car and are willing to expand our North American plant." In May, Kotagiri visited LG Magna's headquarters in Incheon and discussed future business strategies and collaboration plans with Jung Won-seok, CEO of LG Magna. KB Securities recently analyzed in a report that "LG Electronics' automotive components business is expected to turn profitable for the first time this year," and estimated that "with LG Magna preparing to operate a new plant in Mexico, it is likely that core components will be supplied to the 'Apple Car' in collaboration with LG's automotive parts affiliates."

LG Magna plans to focus on improving profitability through securing new clients and stabilizing mass production to recover initial investment costs. Despite external challenges such as the prolonged shortage of automotive semiconductors and supply chain disruptions, the company intends to continue increasing investments while expanding overseas production bases to boost sales.

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