Canadian supplier Magna International Inc. and South Korea's LG Electronics are forming a joint venture that the companies say will better meet increasing demand for electric vehicle components.
LG Magna e-Powertrain will focus on manufacturing e-motors, inverters and on-board chargers in South Korea, China and the U.S.
Financial terms of the deal were not released, although Reuters reported that LG in South Korea said it agreed to set up a $1 billion joint venture with Magna.
The new LG Magna e-Powertrain immediately will supply General Motors and Jaguar Land Rover, with an eye to land more auto makers.
Incoming Magna International CEO Swamy Kotagiri, who replaces the retiring Don Walker on Jan. 1, told Automotive News Canada in a phone interview that the supplier is always on the hunt for "deliberate, scaleable, modular building blocks" in the EV supply chain.
"Two of the most important blocks are the inverters and e-motors," Kotagiri said.
LG's e-motor and inverter, already being used in the Chevy Bolt, mesh with Magna's plan to bolster its position in the EV supply chain.
"We've always been focused on getting power to the wheels, whether it be the transmission or the driveline," Kotagiri said. "From our viewpoint, electrification is a sustainable trend going forward. There might be a little difference of opinion on how fast or how slow it is coming."
Kotagiri believes 15 percent of vehicles sold by 2030 will be fully electric.
While he said "it's very difficult to accurately guess the take rates and the specific time" he believes "electrification is a trend that is going to stay."
"The market for e-motors, inverters and electric drive systems is expected to have significant growth between now and 2030, and the JV will target this fast-growing global market with a world-class portfolio," the companies said in a joint statement.
The LG partnership will help accelerate Magna's time to market and scale of manufacturing for electrification components, while the supplier will bring software and systems integration to the joint venture.
"We believe that the combination of our in-house prowess and the experience and extensive history of Magna will transform the EV powertrain space faster than if we proceed alone," Kim Jin-yong, president of the LG Electronics Vehicle Component Solutions Company, said in the statement.
Kotagiri said the deal puts the two companies "at the forefront of electrification."
The joint venture will include more than 1,000 employees located at LG locations in the U.S., South Korea and China. Kotagiri said the vast majority of those workers are already employed by LG and Magna and will work out of existing facilities.
The transaction is expected to close in July 2021, subject to a number of conditions including obtaining LG shareholder approval and all necessary regulatory approvals.