Electric Vehicle Investments Totaling 2.5 Trillion Won Over 4 Years... Koo Kwang-mo's Swift M&A Strategy

LG Electronics, Infotainment-Powertrain-Lighting-Chargers
Considering Support from LG Energy Solution, Innotek, Display Affiliates
Strategic Business Planning Leads to Swift M&A in 4 Years

There is a view that Koo Kwang-mo, CEO of LG Corporation, had a significant influence on LG Electronics and LG Group building a solid supply chain related to electric vehicles. LG Electronics secured four supply chains spanning infotainment, powertrain, lighting systems, and chargers, while affiliates such as LG Energy Solution (battery cells), LG Innotek (automotive electrical and electronic components), and LG Display (vehicle displays) contributed to establishing a tightly integrated system. This was possible thanks to the swift management strategies set by CEO Koo and the group executives, who actively engaged in mergers and acquisitions (M&A) and joint venture formations.

Koo Kwang-mo, CEO of LG Corporation, is conversing with attendees at the '2023 Korea Small and Medium Business Conference' held on May 23 at the lawn yard of the Presidential Office in Yongsan, Seoul.
[Photo by Yonhap News]

Within four years and four months after Koo became chairman of the group in June 2018, LG Electronics invested about 2.5 trillion KRW to acquire four electric vehicle-related companies and formed a joint venture with one. The acquisition pace was fast, and the investment amount was substantial. First, LG Corporation and LG Electronics acquired Austrian LED vehicle lighting system company ZKW for 1.4 trillion KRW, with LG Electronics holding 70% and LG Corporation 30% of the shares. Two years later, in December 2020, they established LG Magna e-Powertrain, a joint venture worth 1 trillion KRW with Canadian Magna International. LG Magna e-Powertrain attracted global attention as Magna is the world's third-largest automotive parts supplier after Germany's Bosch and Japan's Denso and was a key partner in Apple's electric vehicle project 'Titan.'

In September 2021, LG Electronics acquired Israeli automotive cybersecurity company Cybellum for 100 billion KRW. The following year, in 2022, they acquired two electric vehicle charger companies: Apple Mango (now HiBee Charger) for 10 billion KRW in June and Spill for 23 billion KRW in December. The acquisition of HiBee Charger involved LG Electronics (60%), GS Energy (36%), and GS Neotek (4%).

LG Electronics secured three electric vehicle supply chains?powertrain, lighting, and chargers?in just over four years. The vehicle infotainment business is led by LG Electronics' VS (Vehicle Solutions) division. On the 31st of last month (local time), they announced supplying an infotainment (IVI) system equipped with the vehicle webOS content platform to the new models of Hyundai Motor's Genesis GV80 and GV80 Coupe. Customers can enjoy YouTube and over-the-top (OTT) content embedded with webOS, developed based on LG Smart TV's operating system, inside the Genesis vehicles.

Besides LG Electronics, affiliates engaged in battery cells (LG Energy Solution), components (LG Innotek), and displays (LG Display) are also supporting the business. This is evaluated to have a significant synergy effect in capacity expansion and order acquisition.

The rapid growth of LG Group's electric vehicle business is analyzed to be due to faster decision-making within the group after CEO Koo's appointment. LG Group announced that CEO Koo's role is "business portfolio advancement." This means that once CEO Koo devises a plan, the management executes it in a coordinated manner. Kwon Bong-seok, Vice Chairman and Chief Operating Officer (COO) of LG Corporation, serves as an outside director on LG Electronics' board. CEO Koo and Vice Chairman Kwon are known to communicate organically with Cho Ju-wan, CEO of LG Electronics, and Eun Seok-hyun, Vice President and head of LG Electronics' VS division.

Cho Joo-wan, President of LG Electronics, is speaking at the 'IAA Mobility 2023' press conference held in Munich, Germany, on September 4 (local time).
[Photo by Yonhap News]

Although the global electric vehicle market has recently slowed down, LG expressed confidence in maintaining stable sales, orders, and profitability. LG Electronics' VS division is on the verge of achieving "annual sales of 10 trillion KRW and year-end order backlog of 100 trillion KRW" this year. Considering that since its launch in 2013, it posted losses for 25 consecutive quarters except for Q4 2015 and turned profitable for the first time in 26 quarters in Q2 last year, this is regarded as a remarkable achievement.

LG Electronics' VS division stated that it can raise its operating profit margin (operating profit as a percentage of sales) to 4-6%. This exceeds the industry average of 3% for automotive parts suppliers. It is said that within about a year after turning profitable, they declared they could achieve profitability higher than the industry average. Kim Ju-yong, Executive Director in charge of management at LG Electronics' VS division, said, "We plan to achieve mid-single-digit (4-6%) or higher profitability in the mid to long term."

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