LG and Magna announce Billion Dollar joint venture in electric car gear
South Korea-based LG Electronics Inc said on Wednesday it has agreed to set up a $1 billion joint venture with automotive supplier Magna International Inc.
According to the report, the deal expands a wave of consolidation among suppliers aiming to capture a growing market for the 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.
Shares of LG Electronics jumped as much as 24.7 percent as of 0358 GMT to their highest since 2011, compared to the broader market KOSPI's 1 percent rise.
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, which counts Apple as its customer, as well as LG Chem, whose wholly-owned LG Energy Solution subsidiary provides EV batteries to Tesla.
LG will own 51 percent of the new company and Magna will own 49 percent, 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.
Magna already makes electronic vehicle gear for companies including Volkswagen. But gaining more control over overproduction of the high-value parts of an electric car “has always been part of the strategy as we move forward,” Magna's incoming CEO, Swamy Kotagiri said.
“With combined synergies of both companies together I think we'll be able to address not only our existing customers but all the major audiences and preferably the new entrances looking for electric platforms,” he said.