SHANGHAI – Magna International CEO Don Walker said the new electric drive systems joint venture it just formed with China’s Huayu Automotive Systems Co., Ltd. (HASCO), a subsidiary of China’s largest automaker SAIC Motor Corp., was simply the result of a “good fit” between the two companies.
“HASCO is a worldknown company. With the technical capabilities that we have together and the customers we are pursuing, it was a very good fit,” said Walker. “That is why we decided to work with HASCO.”
Walker made the comments in an interview at a media roundtable shortly after Magna and HASCO signed the JV contract on October 18 in Shanghai to establish HASCO Magna Electric Drive Systems Co., Ltd. The 50.1:49.9 JV between HASCO and Magna has a registered capital of ¥200 million and will support Magna’s first e-drive business in China, as the Canadian supplier continues to expand its global electrified powertrain offerings and strengthen its local footprint in China.
The JV, based at a yet-to-be announced location in Shanghai, will initially produce an electric-drive powertrain system for the MEB platform for SAIC-Volkswagen and FAW-Volkswagen, according to a statement from HASCO. Start of production is expected in 2020, according to Walker.
“China is the number-one growth market in the world, and they have been clear about their intended leadership in bringing hybrid and electric vehicles to market,” said Walker. “Combining strengths with HASCO helps position Magna and the joint venture for future growth and success.”
For the initial customer order, the JV will leverage Magna’s innovative, highly integrated e-drive system with a focus on the production of the system mainly for the Chinese market. Both partners will give the JV full support to develop localized core competencies in terms of market development, R&D, advanced manufacturing and key parts supply such as gearboxes, inverter components and e-motors, which are key to delivering advanced powertrain technologies and a stronger product portfolio to customers.
“By forming this JV, we will gain more business than if we would have done it on our own,” said Walker. “This is a very important JV in our overall China business, with the penetration of plug-in hybrid vehicles (PHEV) for e-drive systems. It’s a big market in China.”
“The combination of capabilities that Magna has in powertrain and capabilities in customer relationships that HASCO has is very similar to the Magna DNA,” added Joachim V. Hirsch, president of Magna Powertrain.
“The new-energy vehicle (NEV) market will continue to grow at a rapid speed in China. With this trend, SAIC Motor is developing the New Four Modernization strategy focusing on car electrification, connectivity, intelligence, and sharing economy,” said Chen Zhixin, president of SAIC Motor and vice chairman of HASCO, at the JV contract signing ceremony. “The establishment of the JV, a strong combination of HASCO and Magna’s strength to initiate cooperation in NEV electrified powertrain systems, has been a milestone for HASCO to develop its core competencies in the field of key new-energy-related components, as well as a critical measure to strengthen the New Four Modernization strategy for SAIC.”
Walker believes the penetration of NEVs will continue in China and the rest of the world but China is likely to see the fastest penetration rate of battery electric vehicles (BEV). He also expects PHEVs will have a larger market share than BEVs in China by 2025, but penetration will depend on a lot of factors.
“The penetration rate will depend on what the government mandates, how fast the infrastructure is developed to plug the vehicle in and how fast the end consumer accepts it,” said Walker.
Asked about his perspective on the Chinese SUV market, Walker believes it remains a very popular segment and does not see why it will change. He is also quite happy with Magna’s current positioning of offering a wide portfolio of products that he believes offer synergies between the different product groups thanks to knowledge in complete vehicles, different materials and manufacturing processes.
“We are very comfortable with what we have right now,” said Walker.
Magna, the No. 1 supplier in North America and No. 3 globally, had revenues of $3.1 billion in China last year, accounting for about 8.5 percent of its worldwide revenues of $36.4 billion. Walker expects China revenues this year to increase to $4 billion on estimated global revenues of $37.7 billion.