Hyundai And LG Build EV Battery Factory In Indonesia Tesla Canceled It

Hyundai will start production of internal combustion engine (ICE) cars at the end of this year. (photo: doc. hyundai indonesia)

JAKARTA - Hyundai Motor Group, a car manufacturer from South Korea, and LG Energy Solution said on Thursday, July 29 that they will set up a joint venture (JV) in Indonesia. The two will set up a battery cell factory for electric vehicles (EV), with an investment of USD 1.1 billion (IDR 15.9 trillion) each with a 50 percent share of the business.

The JV will help Hyundai Motor Co and its sister company Kia Corp, secure a stable supply of EV batteries at competitive prices for their battery electric vehicles.

In a joint statement on Thursday, July 29, LG Energy Solution (LGES), a wholly-owned battery subsidiary of LG Chem Ltd, and Hyundai signed a memorandum of understanding with the Indonesian government to build a factory in the country.

The news comes as global automakers are now starting to move to secure sources of EV batteries in anticipation of rising electric car sales due to massive government subsidies and quotas for countries around the world, which are trying to reduce carbon emissions.

According to the statement, construction of the plant will begin in the fourth quarter of 2021 and will be completed in the first half of 2023. Indonesia itself continues to promote EV development and domestic battery production to create a downstream industry for the supply of lithium-rich battery material, nickel ore.

In mid-July, Lee Kang Hyun, COO of Hyundai Motor Asia Pacific, had said that his company's car factory in Bekasi, West Java would start producing electric cars in March 2022.

Prior to that, Hyundai will start production of internal combustion engine (ICE) cars by the end of the year. Lee has not explained the identity of the cars but said that by 2022 Hyundai will launch three new models domestically.

"Next year there is a plan to release two ICE models and one electric car, around March, this will be made by CKD [completely knock down] in Indonesia next year", said Lee.

Tesla was previously said to intend to invest in building an electric vehicle production facility in Indonesia. The electric car company owned by Elon Musk is also eyeing the potential for nickel ore in the country. But suddenly, they canceled the negotiations and turned to India instead.

In Indonesia, Tesla hopes to set up its car factory there but asks for tax breaks. Meanwhile, Tesla is also interested in building a battery factory in Australia.