Foreseeing a worldwide surge in sales of electric vehicles and hybrids in the next decade, Magna International is betting on its powertrain business to help catapult the Aurora, Ont.-based global supplier into an electrified future.
That confidence is evidenced by a forthcoming US $1-billion joint venture with South Korea-based LG Electronics to build electric motors, inverters and onboard chargers for customers that will initially include General Motors and Jaguar Land Rover.
“We said pre-joint venture that it was our target to have about a quarter of our sales coming from electrified powertrains by 2025,” Tom Rucker, president of Magna Powertrain,told Automotive News Canada. “This would be somewhere around [US] $1.2 or $1.5 billion.
“And that was pre-JV, so I think this number is going to grow significantly with the joint venture.”
The impending partnership, to be called LG Magna e-Powertrain, is expected to close in the second quarter of 2021, pending regulatory and shareholder approvals. It will be able to provide customers individual powertrain components or entire systems, depending on their needs, Rucker said. GM, for example, will buy individual components for its own system, he said.
BETTING ON EV POWERTRAINS
The components the joint venture produces are “core to the integrated electric drive systems,” Rucker said. “A big portion of the value on electric drive systems are comprised within the e-motor and the converter.”
For Magna, that’s a big deal considering the company believes about half the new vehicles sold worldwide by 2030 will have some sort of electric powertrain. Magna CEO Swamy Kotagiri told Automotive News Canada in December that he thinks that 15 per cent of total vehicles sold will be fully electric by the end of the decade.
The company is betting that its powertrain business will continue to be key to its success as more electrified vehicles arrive. According to Magna’s earnings filing, the company’s power and vision segment, which includes powertrain systems, accounted for $2.7 billion in sales in the third quarter of 2020. That represented about 30 per cent of the company’s total sales for the period.
“Our expertise has been and continues to be what we call supplying power to the wheels,” Rucker said. “For the most part, that is neutral to the power source.”
More joint ventures could be in store for Magna, Rucker said. In recent years, a wave of consolidation has been occurring among suppliers aiming to capture a growing electrification market. In 2020 alone, supplier BorgWarner acquired rival Delphi, while Japanbased companies Aisin Seiki, Denso and Toyota Motor created a new e-axle venture.
Magna, meanwhile, is no stranger to joint ventures of its own. In 2018, it entered into an engineering partnership with BAIC Motor Corp.’s electric-vehicle subsidiary in China.
“We’re always looking for good opportunities as long as they fit our long-term strategic objectives,” Rucker said. “So, I wouldn’t say that this was the last partnership we would announce.”
The LG tie-up will help accelerate Magna’s time to market and scale of manufacturing for electrification components, while the Canadian supplier will bring software and systems integration to the joint venture, the companies said.
“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 Co., said in a statement.
LG has developed electric vehicle components for such vehicles as the Chevrolet Bolt and Jaguar I-Pace.
About 1,000 workers at LG locations in China, South Korea and the United States will work on the project. Most of them are already employed by the companies, Kotagiri said.
While no Canadian Magna locations will be part of the joint venture, Rucker said, Canada is likely to play a role in the company’s electrification strategy moving forward, especially as North America begins to produce more electrified vehicles. “We’ll have to see how
North America develops. We think with the election in the U.S., [electrification] is going to get more speed and acceleration in this regard. And we’re open for business for electrification in Canada as well.”