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EV Batteries

Hyundai Motor, LG Energy to build $1.1 bn EV battery plant in Indonesia

The plant is expected to play a key role in targeting the entire Asia-Pacific market with Hyundai's car factory

By Jul 29, 2021 (Gmt+09:00)

Hyundai Mobis President and CEO Cho Sung-hwan and LG Energy President and CEO Kim Jong-hyun signed a memorandum of understanding on an EV battery factory in Indonesia. Bahlil Lahadalia, Indonesia's Investment Minister, and Indonesia Battery Corp. President Director Toto Nugroho joined the ceremony online.
Hyundai Mobis President and CEO Cho Sung-hwan and LG Energy President and CEO Kim Jong-hyun signed a memorandum of understanding on an EV battery factory in Indonesia. Bahlil Lahadalia, Indonesia's Investment Minister, and Indonesia Battery Corp. President Director Toto Nugroho joined the ceremony online.

Hyundai Motor Group and LG Energy Solution Ltd. will invest $1.1 billion in an electric vehicle (EV) battery cell factory in Indonesia to capture Asia-Pacific EV markets with lower costs.

The South Korean companies and Indonesia’s government agreed to build the lithium-ion battery cell plant with an annual capacity of 10 GWh, enough for 150,000 EVs, on July 28. Hyundai Motor and LG Energy plans to begin mass production in 2024 from the factory, both companies said on July 29. They will start construction in the fourth quarter and complete the works by the first half of 2023.

Hyundai Motor and LG Energy is set to form a 50-50 joint venture for the plant. Hyundai Mobis, the group’s car parts maker, will hold a 25% stake, while Hyundai Motor Co. and Kia Corp. will take 15% and 10%, respectively.

“The joint battery cell plant is expected to play a key role in targeting the entire Asia-Pacific market along with Hyundai Motor’s car factory in Indonesia,” said a Hyundai Motor official, referring to an automobile production facility currently under construction. The country is the largest auto market in Southeast Asia with 1 million units sold a year.

Once the two plants start normal operations, they will be able to produce about 150,000 EVs in Indonesia, South Korea’s auto industry sources expected.

The Association of Southeast Asian Nations (ASEAN), which Japanese car makers dominate, has tough tariff barriers on the auto industry with offshore tariffs on completed vehicles reaching up to 80%. But if an automaker produces cars using 40% or more parts produced in the member countries of the ASEAN Free Trade Area (AFTA), it does not need to pay duties to export within the trade block. 

AMPLE RESOURCES, INCENTIVES

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.

The country has been aggressively fostering the EV industry, by providing car and battery makers with various incentives. In August 2019, the government exempted a luxury tax on EV, for example. The government decided to raise such a tax on hybrid models gradually earlier this month.

The authority agreed to offer incentives and rewards such as exemption of corporate taxes for a certain period of time to support the stable operation of the Hyundai Motor-LG Energy plant in Karawang, near the Indonesian capital Jakarta and also close to Hyundai Motor's car factory in the Deltamas Industrial Complex.

The battery plant is set to produce NCMA (nickel, cobalt, manganese and aluminum) lithium-ion batteries with LG Energy’s new technology.

Hyundai Motor Group plans to equip the battery cells from the factory in models built upon its dedicated platform, Electric-Global Modular Platform (E-GMP), from 2024.

By 2025, it aims to expand its EV lineup to more than 23 models and sell 1 million units a year in the globe.

Hyundai Motor Group Chairman Chung Euisun and LG Group Chairman Koo Kwang-mo discussed cooperation on the battery business in June last year. They were known to have talked about setting up a joint venture at that time.

Write to Byung-Uk Do and Hyung-Kyu Kim at dodo@hankyung.com

Jongwoo Cheon edited this article.
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