'Gwalmoksangdae' LG Electronics Automotive Division "Profit in Q4... Order Backlog Expected to Exceed 15 Trillion Won"

[Asia Economy Reporter Moon Chaeseok] LG Electronics' automotive electronics (vehicle electronic devices) business, identified as a future growth engine, is rapidly emerging. In the third quarter, it achieved its highest quarterly sales and posted profits for two consecutive quarters, and it is expected to secure orders about 15 trillion KRW more than anticipated, along with profits in the fourth quarter.

According to the industry on the 5th, LG Electronics' VS (Vehicle Solutions) Business Division recorded its highest-ever sales of 2.3454 trillion KRW in the third quarter (July to September). Operating profit reached 96.1 billion KRW, marking profits for two consecutive quarters. This increases the likelihood of achieving an annual profit for the first time in nine years since entering the business.

What draws attention is that the VS division is confident about turning a profit in the fourth quarter. On the 28th of last month, during LG Electronics' third-quarter earnings conference call, when Kim Juyong, head of VS division management, was asked by Kim Jisan, head of Kiwoom Securities Research Center, "What are the sales and profitability outlooks for the fourth quarter and next year?" Kim responded, "The complete vehicle OEM (Original Equipment Manufacturer) companies maintained a profit trend in the third quarter through orders, and profitability is expected to continuously improve in the fourth quarter," adding, "Accordingly, the VS division is expected to achieve high sales growth and operating profit in the fourth quarter of this year."

According to Kim, LG Electronics' VS business is mainly composed of 'infotainment,' 'electric vehicle parts,' and 'vehicle lamps' businesses. The automotive parts business, which is evaluated as having high profitability and potential, is gaining confidence as its profitability improves and the pace of targeting advanced markets such as Europe and North America accelerates. This has attracted significant interest from institutional investors (financial investment industry) and the industry participating in the conference call.

About 60% of LG Electronics VS division's infotainment business sales occur in Europe and North America. The company is expanding its reach to clients in Korea and Japan. In the electric vehicle parts business, North America holds a large share, and through the establishment of LG Magna e-Powertrain, the share of European transactions is rapidly increasing. Kim stated, "We expect demand for automotive parts to increase next year and for high growth to continue through new project progress," adding, "We will continue to pursue profitability through sales growth and cost improvements."

Regarding the fact that the order backlog is larger than expected, the industry views this not as a mere 'flash' of strong quarterly performance but as evidence that the business fundamentals are solidly established. According to Kim, the VS division's initially expected year-end order backlog was about 65 trillion KRW, but due to increased new orders in the third and fourth quarters and recent exchange rate rises (strong dollar, weak won), it is projected to reach about 80 trillion KRW by year-end.

Kim explained, "About 60% of the backlog size is from infotainment, the electric vehicle parts account for the mid-20% range, and vehicle lamps make up the remainder," adding, "Among these, the electric vehicle parts market is showing high growth, and through the LG Magna joint venture (JV), it is expected to maintain high growth continuously in the future."

Park Kangho, a researcher at Daishin Securities, wrote in an analysis report after LG Electronics' third-quarter earnings announcement, "Next year, the VS (automotive electronics) division is expected to show higher growth compared to TV (HE) and home appliances (H&A - Home Appliances & Air Solutions)," forecasting, "With increased electric vehicle production and resolution of semiconductor supply disruptions compared to this year, vehicle manufacturers (customers) will expand production, and the trend toward electrification of internal combustion engine vehicles will spread, leading to high growth in headlamp and infotainment sectors."

The growing interest in the management capabilities of Group Chairman Koo Kwang-mo and LG Electronics CEO Cho Joo-wan stems from their bold decision to bet on this sector, which had been in the red for nine years since entering, while decisively exiting past core businesses such as solar power and mobile phones. Chairman Koo, who succeeded the late Chairman Koo Bon-moo on May 20, 2018, acquired Austrian vehicle headlamp manufacturer ZKW for about 1.4 trillion KRW just two months after taking the group chairman position, driving vertical integration in electric vehicle charging, batteries, and parts (automotive electronics).

Four years later, LG Electronics and LG Energy Solution are recognized for securing a solid electric vehicle ecosystem that connects 'vehicle infotainment (vehicle electronics - VS business division) - e-Powertrain (joint venture LG Magna) - charging infrastructure (startup Apple Mango acquisition) - electric vehicle battery five-corner production system.'

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