Hyundai, LG to build battery joint venture in Indonesia

South Korean automaker Hyundai Motor and battery manufacturer LG Energy Solution will establish a $1.1bn joint venture to produce electric vehicle (EV) batteries in Indonesia, with each holding half the business, according to the two companies.

Hyundai Motor and LG Energy have signed a memorandum of understanding with the Indonesian government to develop the lithium-ion battery cell plant with a capacity of 10 GWh/yr that can be equipped with over 150,000 EVs. The facility is scheduled to begin construction in the fourth quarter of 2021 and start mass production in the first half of 2024 and reach full capacity by 2025.

The plant will be located in an industrial cluster in Karawang, which is near Indonesia's capital Jakarta and close to Hyundai Motor's car factory.

Indonesia, the world's largest nickel feedstock producer, which is also expected to be the second largest cobalt feedstock producer by 2022, aims to be a major player in the global EV supply chain that ranges from raw material mining to battery and EV manufacturing.

Indonesia's stable political situation, friendly investment environment, complete infrastructure and well-developed logistics as well as low labour costs has been attracting investors from all over the world to invest in its nickel, cobalt resources and smelting facilities. China's major battery producer CATL and US EV manufacturer Tesla have also showed interest in establishing factories in the country. Indonesia, in the coming years, is expected to become a key lithium-ion battery producer in Asia outside of China, South Korea and Japan.

Hyundai Motor, the fifth largest automotive group in the world, said the partnership with LG Energy Solution aims to secure stable battery supplies for its upcoming EV production at two affiliates - Hyundai Motor and Kia. It is on track to expand its EV line-up to more than 23 models and sell 1mn EVs by 2025.

LG Energy owns a lithium-ion battery factory in Michigan, the US. Its joint venture with General Motors is also building a new plant in Ohio, which is scheduled to be completed in 2022. LG has two battery factories in China and one plant each in South Korea and Poland. Its global battery output capacity reached 120GWh in early 2021, which is sufficient to supply batteries for 2mn EVs. LG Energy is also likely to be a supplier of the 4680-model EV batteries to Tesla.

South Korea's eco-friendly vehicle sales rose to 30,316 units in March, up by 59pc on the year and by 65pc from February, according to data from South Korea's trade, industry and energy ministry (Motie). Exports of eco-friendly vehicles reached 33,164 units in March, up by 29.3pc from a year earlier and accounting for 16pc of the country's total automotive exports of 203,837 units in March.

South Korea is a major global supplier of battery and semiconductor technologies, home to companies that include LG Chem and SK Innovation in the battery sector and Samsung and SK Hynix in chip manufacturing. Its government is introducing tax benefits and incentives for battery and semiconductor investment in a move that is expected to encourage manufacturing and demand for minor metals.