Why All LG Group CEOs Are Meeting with the Mercedes-Benz Chairman – The Changing Landscape of the Automotive Industry in the Autonomous Driving Era

I read an intriguing article. It reports that Ola Källenius, Chairman of Mercedes-Benz, is visiting Korea to meet with the CEOs of major LG Group affiliates all at once. This includes Jo Joo-wan, CEO of LG Electronics, Kim Dong-myung, CEO of LG Energy Solution, Jeong Cheol-dong, CEO of LG Display, and Moon Hyuk-soo, CEO of LG Innotek. Is this high-level meeting merely for parts supply contracts? I see this meeting as a glimpse into the global competition surrounding the next-generation mobility ecosystem, where autonomous driving and AI technologies converge.

According to the article, the core agenda of this meeting is collaboration in the SDV (Software-Defined Vehicle) sector. While the supply of key automotive components such as batteries, displays, and sensors is a major discussion point, it signifies more than just hardware supply. The global automotive industry is currently undergoing a rapid transition from a traditional mechanical focus to a mobility platform where software and AI are central. Tesla’s generation of approximately 15% of its total revenue from software services as of 2022 illustrates this shift well.

Mercedes-Benz has already announced its ‘Electric First’ strategy in 2021, declaring a complete transition to an electric vehicle platform by 2030. However, the goal seems to be more than just manufacturing electric cars; it is to realize a ‘moving computer’ integrating AI-based autonomous driving and personalized digital services. Källenius’s statement last year that the goal is to provide customers with an outstanding digital product experience can be understood in this context.

But why LG Group? Personally, I believe it’s because LG Group possesses almost all the core technologies needed for the autonomous driving era. LG Electronics is already collaborating with GM, Ford, and others in the fields of automotive infotainment systems and telematics, with its automotive electronic components revenue reaching about 8 trillion won as of 2023. LG Display holds the top global market share in automotive OLED panels. Particularly, curved and transparent display technologies are expected to play a crucial role in the interior space innovation of future autonomous vehicles.

LG Group’s Role from the Perspective of AI and Autonomous Driving

The core of autonomous driving technology is ultimately AI. AI algorithms operate in all processes where the vehicle perceives its surroundings, makes judgments, and determines the optimal route. It is known that for Level 4 autonomous driving, several terabytes of data need to be processed in real-time per second. Such massive computation requires not only high-performance semiconductors but also efficient thermal management, stable power supply, and accurate sensor data.

LG Innotek shows strengths in camera module and LiDAR sensor technologies. As of 2023, it holds about a 12% market share in the automotive camera module market, ranking after Bosch (Germany) and Continental (Germany). It is particularly evaluated for having a competitive edge in HDR (High Dynamic Range) technology that enhances AI-based object recognition accuracy and night shooting performance. Since the quality of cameras and sensors, which serve as the eyes of autonomous vehicles, is directly linked to safety, the technology in this field is very important.

LG Energy Solution is another key element. Autonomous vehicles consume significantly more power than conventional vehicles because AI processors, multiple sensors, and high-resolution displays operate simultaneously. It is known that the Tesla Model S consumes about 15-20% more power in autonomous mode compared to regular driving. As of 2023, LG Energy Solution ranks second in the global electric vehicle battery market with a 27.1% market share, showing strength particularly in high-capacity battery pack technology.

What is truly intriguing is the role of LG Electronics. They are not just supplying components but are developing a software platform that turns the entire vehicle into an integrated AI system. Since 2022, LG Electronics has been pursuing a ‘Vehicle as a Service (VaaS)’ strategy, aiming to provide comprehensive solutions ranging from automotive OS to cloud connectivity and personalized services. This is a different approach from Google’s Android Automotive or Apple’s CarPlay.

Strategic Significance Amid Global Competition

The reason this meeting is even more meaningful is due to the competitive landscape in the global automotive industry. Currently, in the field of autonomous driving technology, fierce competition is ongoing among the U.S.’s Tesla, Waymo (Google), China’s Baidu, and Germany’s BMW and Mercedes-Benz. The growth of Chinese companies is particularly notable, with Baidu’s Apollo platform already offering commercial services in over 30 cities in China.

From Mercedes-Benz’s perspective, having a reliable technology partner is essential to not fall behind in this competition. The article mentions that Källenius had a private ‘Tech Day’ with LG Group CEOs in Germany last year, suggesting that a considerable level of technology verification and trust has already been established. In fact, Mercedes-Benz began applying LG Display’s OLED panels to its EQS model from late 2023, with user satisfaction reportedly very high.

The competition with Samsung Group is also an interesting aspect. According to the article, Källenius is also scheduled to meet with Lee Jae-yong, Chairman of Samsung Electronics. Currently, Samsung is collaborating with BMW and Audi, but there has been no full-fledged collaboration with Mercedes-Benz. This means that Korea’s two major conglomerates are competing for the premium brand Mercedes-Benz. Samsung has strengths in semiconductor and memory technology, while LG shows competitiveness in displays, batteries, and automotive components, suggesting that they will appeal in different areas.

Personally, I believe LG Group is in a more advantageous position. In autonomous vehicles, the integration and optimization of the entire system are more important than the performance of individual components. LG Group can provide a one-stop solution covering all areas from batteries to sensors, displays, and software. This offers a significant advantage in reducing development costs and time for vehicle manufacturers. In fact, Volkswagen announced in 2022 that it would reduce the number of parts suppliers from 5,000 to 1,000 as part of its ‘Software First’ strategy, which aligns with this context.

From a market size perspective, it is also attractive. The global autonomous vehicle market is projected to grow from about $7 billion in 2023 to $165 billion by 2030, with an average annual growth rate of 57%. It is also predicted that by 2030, vehicles with Level 3 or higher advanced autonomous driving features will account for 25% of total new car sales. If LG Group can establish itself as a major player in this market through its collaboration with Mercedes-Benz, it could secure a new revenue source worth tens of trillions of won over the next decade.

However, there are some concerns. The first is the issue of technological dependency. The core AI algorithms and semiconductor technologies of autonomous driving are still dominated by the U.S. and China. No matter how excellent the hardware LG Group provides, if it loses leadership in the software platform, it may end up remaining a parts supplier. The second concern is the rapid pursuit by Chinese companies. Chinese companies like BYD and CATL are rapidly expanding their market share based on price competitiveness.

Nevertheless, this meeting seems to be an important turning point for LG Group. It is an opportunity to leap from mere B2B parts supply to becoming a key partner influencing the entire vehicle experience felt by end consumers. If LG’s technologies are integrated into the ‘MBUX (Mercedes-Benz User Experience)’ platform that Mercedes-Benz is promoting, it will greatly aid in expanding collaborations with other premium brands in the future.

As autonomous driving and AI technologies continue to advance, it seems the entire value chain of the automotive industry will be restructured. The boundaries between traditional automakers and parts suppliers are becoming blurred, and software and services will take on a larger share. In this changing landscape, I am truly looking forward to seeing what new value LG Group will create through its strategic partnership with Mercedes-Benz. The ‘Future Strategy Conference’ to be held on the 14th in Incheon, where Källenius is expected to announce his strategy for the Korean market, also seems worth paying attention to.

This article was written after reading an industry article and adding personal opinions and analysis.

Disclaimer: This blog is not a news medium, and the content written reflects the author’s personal views. The responsibility for investment decisions lies with the investor, and no liability is assumed for investment losses based on the content of this article.