LG and Magna announce billion dollar joint venture in electric car gear

South Korea-based LG Electronics Inc and automotive supplier Magna International Inc are launching a joint venture that will make key components for electric cars, LG Electronics said on Wednesday

The joint venture, tentatively called LG Magna e-Powertrain and valued at $1 billion, will manufacture e-motors, inverters and onboard chargers, according to LG Electronics.

The deal expands a wave of consolidation among suppliers aiming to capture a growing market for electric vehicle, e-axle systems, which combine electric motors, power controls and driving gears in one unit. Earlier this year, gear maker BorgWarner Inc acquired rival Delphi, and Japanese manufacturers Aisin Seiki Corp, Denso Corp and Toyota Motor Corp have created a new e-axle venture called BluE Nexus.

LG Electronics is an affiliate of South Korea's fourth-largest conglomerate, with interests ranging from electronics, including smartphones, to home appliances. LG Group's major affiliates include LG Display Co Ltd, which counts Apple Inc as its customer, as well as LG Chem Ltd, whose wholly owned LG Energy Solution subsidiary provides EV batteries to Tesla Inc.

LG will own 51% of the new company and Magna will own 49%, LG said.

The transaction is expected to close in July 2021 pending LG shareholder approval, among other conditions, and will employ 1,000 people at LG locations in the United States, Seoul and China, according to a press release.

LG has previously supplied motors, battery packs and other components to GM’S Bolt EV.

LG Electronics' vehicle component solutions business has reported 19 quarters of consecutive losses.

When asked about the timeline of its Vehicle Component Solutions business' turnaround during an earnings call in October, the company said LG Electronics expects to swing to profit in the third quarter of next year.

Sales from this business were $150 million in 2019, but Kotagiri said he expects a compound annual growth rate of around 50% by 2025.