LG Electronics will set up a joint venture with the world’s third-largest auto part maker Magna International in a bid to raise the competitiveness of its vehicle component business, the company said Wednesday.

Tentatively named “LG Magna e-Powertrain Co,” the envisioned entity will launch in July 2021. It will be headquartered in Incheon, west of Seoul, and will have around 1,000 employees.

According to the plan approved by LG’s board of directors, the joint venture will be borne out of LG’s existing business.

The Korean firm will first split off most of its green car parts segment that supplies motors, inverters, chargers and other drive systems for electric vehicles.

Magna will then acquire a 49 percent stake in the separated unit for a price of $453 million. LG will retain the remaining 51 percent of shares.

LG described the deal as “the best decision” to improve competitiveness and growth potential of the business.

Magna is a Canadian auto part manufacturer founded in 1957. The Ontario-based firm was the world’s third largest supplier of powertrains, chassis and other various parts by revenue last year.

LG has established experience in the development of electric vehicle components most notably for the Chevrolet Bolt EV and Jaguar I-PACE.

While LG will help accelerate Magna’s time to market and scale of manufacturing for electrification components, Magna will bring software and systems integration capabilities to the joint venture.

“This partnership fully aligns with our strategy of being at the forefront of electrification and supporting automakers with a diverse and world-class portfolio,” said Magna president and incoming CEO Swamy Kotagiri. “By combining our strengthens, we expect to gain investment efficiency and speed to market with synergies to achieve more, all while continuing to capitalize on the acceleration of the electrified powertrain market.”

The partnership will enable the two companies to continue to grow their electric powertrain product offerings by leveraging existing technologies, engineering capabilities and global footprints, LG said. 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.

“Manufacturers need to be disruptive to maintain leadership positions in electrification and, through this deal, LG is entering a new phase in its automotive components business, a growth opportunity with enormous potential,” said Kim Jin-yong, president of the vehicle component solutions at LG. “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.”

By Song Su-hyun (song@heralcorp.com)