Hyundai, LG, SK Target Indonesia, Japan's Stronghold, with Electric Vehicles

SKC to Start Construction of 50,000t Annual Capacity Copper Foil Plant in Malaysia Next Month
Hyundai Motor Plans New Car Factory
Annual Production of 250,000 Units by 2030
LG Energy Solution Also Establishes Battery JV with Hyundai Motor
Forming EV Value Chain from Steel Sheet to Finished Car, Battery, Copper Foil, and Tire
"Significant Achievement in Market Dominated by Japan"

[Asia Economy Reporter Hwang Yoon-joo] Domestic electric vehicle-related companies such as Hyundai Motor Company, LG Energy Solution, and SKC have launched a large-scale campaign targeting the Indonesian region, a stronghold of Japanese automakers. Indonesia, which is positioning the electric vehicle industry as a new growth engine, is being developed as a production base to preoccupy the ASEAN region's electric vehicle market, where finished car tariff barriers are high, with the strategy interpreted as aiming to increase the market share of Korean finished car and parts industries.

According to the industry on the 2nd, SKC will begin construction next month of a copper foil factory with an annual capacity of 50,000 tons at the KKIP industrial complex in Kota Kinabalu City, Sabah State, Malaysia, located northeast of Borneo Island, Indonesia. This factory is expected to be completed as early as the end of next year. The 50,000 tons of copper foil is typically enough to supply 1.5 to 2 million electric vehicles.

Copper foil, a thin copper sheet through which current flows, is a raw material for anode materials, a core component of batteries, and semiconductor package circuit boards. Since it is produced by plating, electricity and water infrastructure account for the largest part of production costs. For this reason, Malaysia, which has low electricity costs and well-established industrial water infrastructure, was chosen as the first overseas production base. The fact that Kota Kinabalu City is near Hyundai Motor's production plant in Indonesia was also a major reason for selecting it as a production base.

With SKC's entry into Malaysia, a Korean electric vehicle value chain has been created in Indonesia, linking automotive steel (POSCO) - finished cars (Hyundai Motor) - batteries (Hyundai Motor, LG Energy Solution) - materials (SKC) - parts (Hankook Tire).

One of the planned sites for Hyundai Motor's new factory in Indonesia, the Karawang area (blue arrow), and Kota Kinabalu City in Malaysia, where SKC will begin construction next month (red arrow). Kota Kinabalu City, Malaysia, is located on the island of Borneo in Indonesia. (Photo by Google Maps)

Earlier, in November last year, Hyundai Motor announced plans to build a car factory with an annual capacity of 150,000 units in the Bekasi area near Karawang. Hyundai Motor has set a basic entry strategy of 300,000 units in major countries considering economies of scale. The new Indonesian plant aims to operate by the end of this year and produce 150,000 units. Subsequently, the production scale is planned to expand to 250,000 units annually by 2030.

The reason Hyundai Motor is expanding new investments in Indonesia is interpreted as an intention to preoccupy the Southeast Asian electric vehicle market using Indonesia as a base. Since automobile tariffs in Southeast Asia range from 5% to 80% depending on the region, it is difficult to penetrate the market without a local production base.

In particular, Indonesia's internal combustion engine vehicle market is dominated 95% by Japanese companies such as Toyota and Honda, making it difficult for latecomers like Hyundai Motor to increase market share. This is also why Hyundai Motor and related Korean automotive industries are focusing on electric vehicles. Hyundai Motor and LG Energy Solution are expected to announce the establishment of a joint venture with an annual battery capacity of 10GWh in Indonesia as early as this month. Although detailed contract terms have not been finalized, it is known that the joint venture's shareholding ratio is likely to be Hyundai Motor 51% and LG Energy Solution 49%. The joint venture will produce battery cells, packs, and systems exclusively for electric vehicles. Currently, discussions are underway with the Indonesian government regarding tax benefits such as corporate tax exemptions, and the joint venture establishment is expected to be announced as early as next month.

Ko Tae-bong, head of the research center at Hi Investment & Securities, said, "Since Japan has entered Indonesia since the 1970s and occupies 95% of the entire market, it is not easy for latecomers like Hyundai Motor to penetrate. Initially, they will produce internal combustion engine vehicles and then increase electric vehicle production to raise market share in Southeast Asia."

This content was produced with the assistance of AI translation services.