Magna CEO Don Walker speaks during the company's annual shareholder meeting in Toronto on May 8, 2014.Aaron Harris/Reuters
Magna International Inc. has sold its automotive battery packs business to Samsung SDI Co. Ltd., as the South Korean giant expands its battery capability amid an expected rise in production of electric and hybrid vehicles.
The deal includes plants in Michigan, Austria and China, part of the assets the Canadian auto parts giant picked up when it paid $75-million in 2012 to buy out the interest in Magna E-Car Systems LP held by Magna founder Frank Stronach.
"Magna remains focused on its core propulsion competencies including engineering, drive trains and fuel systems," the company said in a two-paragraph news release that did not reveal any financial details of the transaction.
"We consider the divestiture of the battery pack business to be positive," BMO Nesbitt Burns analysts Peter Sklar said in a note. "We considered it to be a non-core business for Magna, and a product category where the company was unlikely to pursue manufacturing scale given the capital that would have been required."
Samsung SDI is a key producer of batteries for cellphones, energy storage systems and automotive uses.
"The acquisition is a key strategic step for Samsung SDI to strengthen the competitiveness of our automotive battery business," Nam seong Cho, president of Samsung SDI said in a statement.
That business includes a deal signed with BMW AG last year to supply lithium-ion battery cells for the Germany-based auto maker's i3 and i8 models and other hybrids not yet announced.
Magna's technology and experience in assembling battery packs will help Samsung SDI land customers in China, North America and Europe, the statement added.
Before Mr. Stronach sold his stake in Magna E-Car, he said he believed the market for electric vehicles could generate $20-billion in revenue for the company annually by 2020. In 2009, Magna's E-Car division built a battery-powered Ford Focus model that it used as a demonstration vehicle to show off the company's technological prowess.
Samsung said Monday that forecasts show the global market for electric, hybrid and plug-in hybrid vehicles – all of which use batteries – growing to 7.7 million vehicles by 2020, compared with 2.1 million last year.
Consulting firm Navigant Research is somewhat less optimistic, forecasting sales of 6.4 million of such vehicles globally by 2023.
Forecasts call for overall global light vehicle sales of about 88 million this year, so vehicles with batteries will likely remain in the single-digits in percentage terms well into the 2020s.