Motley Fool seems pretty high on Magna as a stock that could be on the rise. Especially with their partnership with LG Electronics.
Magna International (TSX:MG)(NYSE:MGA) is an under-the-radar EV play.
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Magna International
Magna International (TSX:MG)(NYSE:MGA) is probably not the first company that comes to mind when you think about EVs. It is a traditional auto-parts company and contract car manufacturer. For most of its history, Magna has been involved in the oil-powered car industry. But recently, it took a major step toward becoming a player in the EV space. Partnering with a major Korean electronics company, it is now manufacturing electric motors and other crucial EV parts.
How MG is becoming a leading player in the EV revolution
Earlier this year, Magna announced that it had formed a joint venture with
LG Electronics. The venture would see the two companies work together to make electric motors, power electronics, and integrated solutions. Much like Magna, the new company would supply these parts to established auto makers. There is significant demand for such parts.
Traditional auto makers like
Ford are very interested in getting into EVs. Ford actually had a plan to manufacture an electric car with Rivian but later scrapped the idea. Today, Ford plans on making EVs on its own. Lacking expertise in manufacturing key EV components, it will likely have to draw on third party suppliers. LG-Magna could scoop up some business from it, since the two companies involved have expertise in both car parts and electronics.
Since its announcement, LG-Magna has made significant progress. As of December 4, it had
- Launched a website;
- Purchased office space; and
- Announced its lineup of products.
So far, I haven’t seen any indication that the new joint venture is actually taking orders. Its website does not have an order page or even a client relations page. It does, however, have the full specifications on all of its products, suggesting that R&D is well underway.
One big downside
Although Magna International does have a very interesting EV project in the works, one significant downside has to be mentioned.
The company’s historical performance has
not been very good. Over the last three years, its growth in revenue, net income, and EPS has been negative. The growth in net income has been negative over a five-year period as well. Traditional car manufacturing is not a growth industry. In fact, the industry in North America is in decline. I feel this should be mentioned, because the EV project with LG — while very exciting in itself — is pretty much the only thing that Magna has going for it. Its financial performance has not been amazing.
