Indonesia inks US$1.1b deal with Korean firms to build EV battery cell factory

JAKARTA: Indonesia has signed a US$1.1 billion (Rp15.9 trillion) deal with a consortium of South Korean companies to build an electric vehicle (EV) battery cell factory that will employ around 1,000 workers.

The memorandum of understanding (MoU) was signed in an online event on Wednesday by Investment Minister Bahlil Lahadalia as well as representatives of state-owned Indonesia Battery Corporation (IBC) and South Korean companies Hyundai Motor Company and LG Energy Solution.

The Korean consortium, held in equal parts by the two Korean firms, will establish a joint venture with IBC to build a battery cell facility in Karawang, West Java, with a production capacity of 10 gigawatt hours (GWh) for Hyundai's electric vehicles.

The two parties aim to start construction in the fourth quarter of this year and complete it in the first half of 2023, with a view to commencing mass production in the first half of 2024.

A cell is a key element of a battery that converts chemical energy into electrical energy.

As reported earlier, Hyundai began work on a $1.55 billion EV car factory in West Java in 2019 with the target of eventually reaching a production capacity of 250,000 vehicles.

Hyundai and LG are not the only foreign companies eying Indonesia’s EV battery industry. The government inked an agreement with Chinese battery maker CATL last year for $5.1 billion to be invested in Indonesia.

“We will oversee the investment for this battery cell [plant] from beginning to end,” Bahlil said in a statement on Thursday, adding that local businesses as well as micro, small and medium enterprises (MSMEs) should be involved in the project.

The deal brings Indonesia closer to its goal of becoming a key player in the global battery industry, as the country holds around 24 per cent of the worldwide reserves of nickel, a crucial raw material for batteries.

The deal is part of a US$9.8 billion investment plan outlined in an MoU signed between Bahlil and LG Energy Solution representatives in Seoul on Dec 18, 202, following a series of negotiations between the presidents of the two countries in November 2019.

The MoU envisions an integrated project encompassing key supply chain elements, from mining, smelting and refining to precursor materials and cathode industries.

IBC was established on March 27 as a state-owned holding company for the battery industry. It brings together state-owned oil giant Pertamina, electricity distributor PLN, mining holding company MIND ID and nickel and gold miner PT Aneka Tambang (Antam).

In the first phase, IBC and its partners aim for a production capacity of 10 to 30 GWh, which is to be expanded to 140 GWh by 2030.

“[We are] closer to achieving our target, and now the two countries will partner to develop electric cars and ecosystems going forward,” Sung Hwan-cho, CEO at Hyundai Mobis Co. Ltd, said in the joint statement with Bahlil.

IBC president director Toto Nugroho emphasised the company’s commitment to ensuring Indonesia’s future in the industry, saying in the same statement: “We will produce batteries competitively to meet the needs of Indonesia and also for export.” — The Jakarta Post/Asia News Network