LG Group goes all-out to nurture auto parts sector as new growth engine

[Photo by Han Joo-hyung]

South Korea’s LG Group has set its eyes on the automotive parts business as a new growth engine, with its key executives making visits to the headquarters of global auto manufacturers.

In March, executives from LG Group subsidiaries visited the headquarters of Mercedes-Benz Group AG in Stuttgart, Germany. They are scheduled to visit Toyota Motor Corp.‘s headquarters in Aichi Prefecture, Japan, in September to hold a closed-door LG Tech Day.

The upcoming event is expected to be attended by LG Corp. Vice Chairman Kwon Bong-seok, LG Electronics Inc. Chief Executive Officer Cho Joo-wan, LG Energy Solution Ltd. CEO Kim Dong-Myung, LG Display Co. CEO Jeong Cheol-dong, and LG Innotek Co. CEO Moon Hyuk-soo.

The executives plan to introduce LG Group’s advanced automotive electric and electronic equipment technologies and products to Toyota.

They also plan to strengthen strategic networks with Toyota executives, including CEO Koji Sato, for future car alliances involving electric vehicles, autonomous driving, and connected cars.

Sato made a confidential visit to LG Energy Solution’s Ochang plant in Korea in September 2023 at the invitation of LG Group to observe the plant’s EV battery production process and negotiate supply contracts.

Sato also visited Korea this year to inspect LG Electronics’ automotive and autonomous driving technologies and invited LG executives to Toyota’s headquarters.

Sources noted that LG executives could meet with Toyota Chairman Akio Toyoda during their visit to Japan.

LG Group has been engaged in comprehensive cooperation with Toyota since last year, when it became a Tier 1 supplier.

Toyota, the world’s top automaker, plans to invest 8 trillion yen (approximately $51.95 billion) by 2030 to produce 30 types of EVs and its own batteries, with an aim to sell 3.5 million EVs annually.

LG Group aims to seize this opportunity.

LG’s automotive business is led by LG Electronics, with LG Innotek and LG Display sharing roles.

LG Electronics is strengthening its electronics business capabilities in its Vehicle Component Solutions (VS) Division (in-car infotainment), subsidiary LG Magna e-Powertrain Co. (powertrain), and subsidiary ZKW Group GmbH (lamps).

The VS Division posted sales of 2.69 trillion won ($1.94 billion) and an operating profit of 81.7 billion won in the second quarter of this year. Sales were up 1 percent and the division managed to swing to a profit from an operating loss a year ago.

Despite a temporary slowdown in EV demand, the division continued to grow by actively responding to the increased demand for premium automotive infotainment products.

LG Electronics plans to sustain its sales growth by expanding sales of new premium products and safety and convenience products such as advanced driver assistance systems (ADAS).

LG Energy Solution, in the meantime, has secured over 30 trillion won worth of EV battery supply contracts with Toyota, while LG Chem Ltd. signed a 2.86 trillion won contract to supply cathode materials, a key battery component, to Toyota.

LG Display also supplies some automotive displays to Toyota.

LG Innotek focuses on producing key components related to autonomous driving and EVs. It is accelerating its business structure enhancement by focusing on core automotive parts such as sensing, communication, and lighting modules.

LG Group is also establishing a strategic partnership with German automaker Mercedes-Benz.

In March, top executives from LG Group’s major subsidiaries visited Mercedes-Benz‘s headquarters in Germany to hold an LG Tech Day and introduced automotive technologies and discussed collaboration on automotive parts and materials.

LG Group Chairman Koo Kwang-mo is known to be at the center of the transformation.

Since he took the helm in 2018, LG Group has been focusing on transforming itself from a company centered on home appliances and mobile phones to one focused on automotive parts.

LG Group does not manufacture cars but it is focused on developing high-value components and materials for future vehicles.

MotorTrend, a leading U.S. automotive publication, ranked Koo as the 10th most influential person in the automotive industry.