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Hyundai and LG Energy Solution have opened a $1.1bn battery cell plant in Indonesia as the south-east Asian country works to build an electric vehicle ecosystem.
The launch of the battery plant on Wednesday is part of Indonesia’s push to move up the global EV supply chain. The country has the world’s largest reserves of nickel, a crucial component in EV batteries and steelmaking.
Jakarta has stepped up efforts in recent years to bring in investments for nickel processing and battery and car manufacturing. Chinese automaker BYD and Vietnam’s VinFast said this year that they would begin making EVs in Indonesia.
Indonesian officials said China’s CATL, the world’s biggest EV battery manufacturer, would also start building a battery plant this year.
The South Korean companies launched the factory in Karawang, a city east of the capital Jakarta. It is the first in Indonesia and will have an annual production capacity of 10 gigawatt hours.
The battery cells will be used in Hyundai and Kia’s EV models, the South Korean carmaker said. Indonesian officials have also said about 90 per cent of the factory’s products will be exported to South Korea and India.
The two companies have a 50-50 stake in the project, which was first announced in 2021. Hyundai also has a car manufacturing plant in Indonesia.
President Joko Widodo’s ban on nickel ore exports in 2020 forced foreign companies to invest onshore. The bulk of that investment has come from Chinese companies into the nickel processing sector.
But Indonesia has been offering incentives such as tax breaks to woo nickel and EV-related investments from around the world. Hyundai said in 2021 that the Indonesian government had agreed “to offer various incentives and rewards to support the stable operation” of its battery cell plant.
Since Hyundai and LG Energy first announced they were going to open a battery cell plant in Indonesia, demand for EVs has slowed. Still, analysts said the country would benefit from the global transition to cleaner transportation.
“Indonesia is at the very early stage of EV manufacturing and stands to benefit from incremental gains over the long term, regardless of whether EV moves in the fast or slow lane,” said Kai Wei Ang, Asean economist at BofA Securities.
