Massive rise in sales from overseas production bases
3rd quarter cumulative deficit, lowest in 5 years
Reinforced supply chain management, profitability↑
Growth trajectory to rise in earnest next yea
LG Innotek’s Automotive Components business is just around the corner from being in the black next year. This year’s annual deficit in the Automotive Components business is expected to record the lowest level in 5 years. With the supply of Automotive Components to global companies like finished cars in North America increasing, LG Innotek is expected to start its full-fledged growth next year.
According to a business report from LG Innotek, their 3rd quarter cumulative deficit in the Automotive Components business recorded 7.4 billion KRW this year. Compared to the same period last year, the deficit was reduced by almost half. On an annual basis, the scale of deficit for Automotive Components is expected to be under 10 billion KRW. This is the lowest in 5 years.
The growth in sales from the global manufacturing bases for Automotive Components was also notable. Their production corporation in Poland recorded 132.3 billion KRW in 3rd quarter cumulative sales and turned a surplus. This is close to a 50% rise compared to last year. They mainly manufacture car motors, battery management systems (BMS), DC-DC converters, and car lights at the factory in Poland. The parts manufactured in Poland are then sent to tier 1 Automotive Components companies and European finished car companies.
Their production corporation in Mexico recorded 57.2 billion KRW in 3rd quarter cumulative sales. They were also successful in turning a surplus. This is a 74% rise compared to last year. They mainly manufacture car motors at the factory in Mexico. The parts manufactured in Mexico are mainly sent to North American finished car companies.
The growth of the Automotive Components business is due to a large-scale increase in orders. The volume of sales has increased as the volume of transactions with global EV companies and key Korean finished car companies has increased significantly recently. Its rise as a supplier for camera modules, a key electronic part for a major EV company in North America, has drawn attention from the industry. The cameras for Automotive Components have a higher unit cost than smartphone cameras, which help raise the profitability.
LG Innotek is estimated to have made a quarterly surplus in the 3rd quarter this year. LG Innotek’s Automotive Components business had focused on R&D and investment and had mostly been unable to prevent a deficit so far.
As the strategy for the Automotive Components business became more advanced, the profitability greatly improved. The company refined their product and customer structure. They transferred the automotive camera business (Car CM) from the Automotive Components Business Division to the Optics Solution Business Division to improve their client response capabilities.
They also strengthened their global supply chain management capacity. The adoption of things like platform models are said to have improved profitability. Platform models refer to a general-purpose product-oriented development strategy that minimizes client-specific models (customizing).
The Automotive Components business is expected to turn a surplus and enter a growth trajectory in earnest next year. LG Innotek is expected to emerge as a key affiliate in the mobility business, which is gaining support at the group level.
Reporter So-ra Park (srpark@etnews.com)