Hyundai Motor, LG Energy secure $710 mn for battery JV in Indonesia

South Korea’s Hyundai Motor Group and battery maker LG Energy Solution Ltd. have secured $710 million from financial institutions overseas to finance the planned construction of a battery cell plant in Indonesia.

Hyundai and LG jointly secured the borrowing from five financial institutions at “favorable” interest rates, Hyundai Mobis Co., the auto parts unit of the Hyundai Motor Group, said on Monday.

The fund won’t be provided in a lump sum, but will be offered step by step in accordance with the progress of the battery plant's construction, it said.

The repayment of the 10-year loan is guaranteed by Hyundai Motor Co., Kia Corp., Hyundai Mobis and LG Energy as well as Korea Trade Insurance Corp.

In August of last year, Hyundai Motor Group and LG Energy agreed to set up a $1.1 billion joint venture to produce NCMA (nickel, cobalt, manganese and aluminum) lithium-ion battery cells in Indonesia.

Construction of the plant located in Karawang New Industry City, near Jakarta, will be completed in the first half of 2023.

The factory will begin commercial production in the first half of 2024 with an annual capacity of 10 GWh of battery cells, enough for over 150,000 EVs, according to Hyundai and LG.

Indonesia has ample mineral resources such as nickel and cobalt, key raw materials for EV battery production. The Southeast Asian country is the world’s top nickel producer with the largest reserves.

INDONESIA, HYUNDAI’S SOUTHEAST ASIAN HUB

The new battery cell plant is close to Hyundai Motor’s Indonesian car factory.

Hyundai Motor said in March it started mass production of its iconic all-electric IONIQ 5 crossover at the new car plant in Indonesia, which the top Korean automaker plans to use as its base for an aggressive foray into the Southeast Asian market.

Hyundai Motor has been active in its Indonesian business to crack the Indonesian market dominated by Japanese carmakers such as Japan’s Toyota Motor and Honda Motor.

Hyundai has forged a partnership with LG Energy to secure a stable supply of battery cells.

Indonesia is a promising car market with about 1 million new units sold a year. The world’s fourth-most populous country has strong growth potential as the ratio of car ownership to total population stands at less than 100 cars per 1,000 people.

Meanwhile, Korea Trade Insurance Corp. has selected electric vehicles and batteries as key sectors for their financial support and credit guarantees in 2022.

It has provided a total of $1.51 billion in such funds to Korean carmakers and battery makers so far this year.

Write to Han-Shin Park at phs@hankyung.com
In-Soo Nam edited this article.