The CEO of the most important car company you’ve never heard of explains why he’s joining with LG to make a $1 billion play for the electric car space (MGA)

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    The CEO of the most important car company you’ve never heard of explains why he’s joining with LG to make a $1 billion play for the electric car space (MGA)

    Magna LG Powertrain Electrification

    Magna and LG have a new JV to develop powertrains for the electric vehicles of the future.

    Magna


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    • Magna International and LG have created a joint venture to develop powertrains for electric vehicles.
    • Magna has been elevating its profile as electrification sweeps the auto industry, while LG also has a deal to build a battery factory with GM.
    • “The strategy has been a long time coming,” Magna’s new CEO, Swamy Kotagiri, said in an interview with Insider.
    • Visit Business Insider’s homepage for more stories.

    Magna International is rapidly becoming a huge player in the auto industry. 

    The $23-billion, Canada-based company was already big. Founded in 1957, it’s long been known as a premier parts supplier, and through its Austrian Magna Steyr division, it runs the world’s largest contract manufacturing facility, building vehicles for the likes of BMW and Jaguar Land Rover.

    More recently, Magna has become a technology provider, and at the end of last year, it unveiled a deal with South Korea’s LG Electronics to make all-electric powertrains — motors, chargers, and the tech they require to extract electricity from batteries. 

    The joint venture, LG Magna e-Powertrain, should receive government regulatory approval and the okay from LG shareholders by the middle of 2021 and expects to employ 1,000 people. 

    Read more: Henrik Fisker reveals how he and a little-known auto giant are developing a radically different business model for making electric cars

    “The strategy has been a long time coming,” Magna CEO Swamy Kotagiri said in an interview with Insider. “We found this deal with LG to be symbiotic in many ways.”

    LG Electronics is part of the massive LG conglomerate, with $150 billion in annual revenue. The JV with Magna is valued at $1 billion, according to the companies, and will be 51% owned by LG and 49% by Magna

    Kotagiri became CEO in January, and in a prior interview said that he expects 25% of the global vehicle market to be electric by 2025 (currently, EVs make up about 2% of annual sales). Partnering with LG — which is also building a $2.3-billion electric-battery plant with General Motors in Ohio, through its LG Chem unit — is a way to strategically position Magna to capture a significant share of growth in EV sales.

    Magna has also partnered with Fisker, Inc., a startup founded by serial automotive entrepreneur and sometimes-Elon Musk rival Henrik Fisker, to produce the Ocean SUV, an EV slated to start rolling off the assembly line at Magna Steyr by the end of 2022. 

    Magna has taken an escalating, 6% stake in Fisker, a company that went public last year through a reverse-merger and is now valued at about $4 billion. The Ocean will be built on a proprietary engineering platform that Magna has developed.

    The LG venture should enable Magna to offer more of the same to other automakers, as they negotiate the challenging transition from the internal-combustion engine to electric powertrains. 

    “Magna has a significant presence with [automakers] already,” Kotagiri said.

    Read more: How Magna’s new CEO plans to make the $18 billion, little-known company a go-to provider for the auto industry’s high-tech future

    He added that by consolidating the value chain for electric motors and related technologies — the “building blocks of what brings a powertrain together” — the JV is better situated to provide systems from customers in North America and Europe, two of the world’s largest and most competitive vehicle markets.

    Critically, Kotagiri said that the JV would be scalable. It would be designed to adapt to demand from customers as the market expands. It would also provide them with a way to electrify their fleets without having to create the technology from scratch.

    “Manufacturers need to be disruptive to maintain leadership positions in electrification,” Kim Jin-yong, President of the LG Electronics Vehicle Component Solutions Company, said in a statement when the deal was announced in December.

    And as far as Kotagiri is concerned, the JV will be ready to open for business in 2021. 

    “We are definitely looking for [automakers] to come to us,” he said.


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