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Auto components

LG Electronics eyes growth potential in US auto parts market

By Mar 09, 2021 (Gmt+09:00)

3 Min read

Jaguar EV equipped with LG Electronics' in-vehicle infotainment system
Jaguar EV equipped with LG Electronics' in-vehicle infotainment system

LG Electronics Inc. is aggressively expanding its automobile components business in the North American market – a move that is expected to help turn around the loss-making business in the third quarter at the earliest.

According to an audit report the company filed with South Korea’s financial regulator last week, its vehicle component solutions division, which includes the auto parts making business, posted 1.27 trillion won ($1.11 billion) in revenue from the US market in 2020, up 26% from the previous year.

The revenue growth in the US market is much higher than the 6% increase in LG’s overall vehicle component business sales in the cited period.

The proportion of its North American market sales to the company’s entire auto parts revenue also increased to 22% in 2020 from around 10% a year earlier.

“LG’s automobile component business has entered a new phase of growth,” said Kim Jin-yong, president of LG Electronics' vehicle component solutions unit, during the Consumer Electronics Show (CES) 2021 in January.

LG and Magna are set to launch an EV parts JV in July.
LG and Magna are set to launch an EV parts JV in July.

SHIFTING FOCUS TO ELECTRIC CAR PARTS

LG Electronics, the home appliance unit of Korea’s fourth-largest conglomerate, has been beefing up its presence in the global automotive solutions market with its focus on the in-vehicle infotainment system, which accounted for 60% of its auto parts sales in 2020.

But the company is gradually shifting its focus to components for electric vehicles.

In December of 2020, LG signed a deal with Canadian auto parts maker Magna International Inc. to launch a $1 billion joint venture to manufacture e-motors, inverters and onboard chargers.

The JV, tentatively named LG Magna e-Powertrain Co., is set to launch in July.

Industry officials expect the JV to report around 500 billion won in revenue this year and post a 50% annual sales increase for the next few years.

During an earnings conference call in February, Magna, the world’s No. 3 auto parts maker, said it will procure at least half of its powertrain-related components from the JV, and eventually the whole volume from it.

LG Group’s other affiliates involved in the auto parts business include LG Display Co., which counts Apple Inc. as its customer, as well as LG Chem Ltd., whose wholly owned subsidiary, LG Energy Solution Ltd., provides EV batteries to Tesla Inc.

LG Electronics' connected car concept at the Korea Electronics Show 2020
LG Electronics' connected car concept at the Korea Electronics Show 2020

GM’s BOLT EV CONSIDERED AN LG CAR

Jointly with its affiliates, LG Electronics is already supplying motors, battery packs and other components to GM’s Bolt EV and Jaguar I-PACE, the British firm’s first all-electric car. GM’s Bolt EV is referred to as an “LG car” as more than half of its components are made by LG Group affiliates.

According to market researcher IHS Markit, the global EV market is forecast to grow to 28.37 million units in 2023 from 9.96 million units in 2020.

LG Electronics is also streamlining its global components supply network to improve efficiency.

The company recently closed its plant in Kunshan, southeastern China, which made infotainment components such as audio, video and navigation systems. Following the closure, LG’s overseas automotive electronics production base will come down to two major sites – the plant in Nanjing, China, responsible for EV powertrain parts; and the factory in Vietnam making in-vehicle infotainment components.

Industry officials expect LG Electronics’ auto parts business to swing to profit in the third quarter of this year at the earliest.

Write to Su-Bin Lee at lsb@hankyung.com
In-Soo Nam edited this article.
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