LG Energy Solution Builds Global Five-Point Battery Production Network... Starts Battery JV Construction with Hyundai Motor in Indonesia

$1.1 Billion Investment to Establish Joint Venture with 50:50 Equity Split
Annual Production of 10GWh Battery Cells Starting 2024

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Motor Group, a leading domestic automaker, and battery company LG Energy Solution have joined forces to actively target the ASEAN electric vehicle market and secure leadership in the future electric vehicle market. Through this collaboration, LG Energy Solution will establish a global five-point production system spanning the U.S., Europe, China, Korea, and Southeast Asia.

On the 29th, Hyundai Motor Group and LG Energy Solution announced that they have signed an investment agreement with the Indonesian government to establish a battery cell joint venture factory with an annual capacity of 10 gigawatt-hours (GWh) in Indonesia.

Prior to signing this investment agreement, Hyundai Motor Group and LG Energy Solution recently signed a contract to establish the battery cell joint venture factory. Through the investment agreement with the Indonesian government, both parties agreed to invest approximately 1.1 billion USD (about 1.17 trillion KRW) to establish the joint factory.

The joint venture will be equally owned by Hyundai Motor Group and LG Energy Solution, each holding a 50% stake. Both parties plan to complete the establishment of the joint venture company by the third quarter after completing various legal procedures, start construction of the joint factory in the fourth quarter, and aim to complete it by the first half of 2023. Subsequently, mass production of battery cells is planned to begin in the first half of 2024.

The establishment of this battery cell joint venture factory in Indonesia marks the first overseas joint venture between two top-tier global companies representing South Korea in the automotive and battery sectors, respectively, further solidifying their decade-long cooperative relationship.

Indonesia, which ranks first in the world in both nickel reserves and mining volume?key raw materials for batteries?is actively promoting the development of electric vehicle-related industries at the government level, making it a strategic hub for targeting not only the ASEAN market but also the global electric vehicle market in the future.

The Karawang Regency industrial complex, where the battery cell joint venture factory will be located, is situated about 65 km southeast of Jakarta, the capital of Indonesia. It is evaluated as an optimal location due to its well-established major transportation networks, including airports, ports, and highways.

Additionally, through the government's proactive industrial attraction strategy, the complex is being developed as a large-scale integrated industrial park that gathers five major industry clusters, including the core automotive industry, electronics, building materials, food, and logistics services.

NCMA Lithium-ion Battery 10GWh, Production Capacity for Over 150,000 Electric Vehicles... Stable Supply of ASEAN Strategic Electric Vehicle Batteries

The battery cell joint venture factory of Hyundai Motor Group and LG Energy Solution will produce battery cells with an annual capacity of 10 gigawatt-hours (GWh), enough for approximately 150,000 electric vehicles, on a total site area of 330,000 square meters.

The battery cells produced at the joint venture will apply LG Energy Solution’s new battery technology, featuring high-content nickel (N), cobalt (C), manganese (M), and aluminum (A), which enhances output and reduces chemical instability, resulting in high-performance NCMA lithium-ion battery cells.

These battery cells will be primarily installed in Hyundai and Kia’s dedicated electric vehicles equipped with the E-GMP platform starting in 2024, as well as various electric vehicles to be developed in the future.

Both parties expect that through the battery cell joint venture factory, they will establish a system capable of actively responding to the explosive growth in global electric vehicle demand by stably supplying batteries to Hyundai Motor Group’s dedicated electric vehicles.

Hyundai and Kia will be able to rapidly apply LG Energy Solution’s industry-leading new battery technologies when developing future dedicated electric vehicle models and receive optimized battery cells tailored to each vehicle’s performance and detailed specifications, enabling the production of highly competitive electric vehicles with high efficiency, high performance, and safety.

Hyundai Mobis, responsible for battery system production, plays a key role in establishing and operating this joint venture factory. By strengthening global cooperation with LG Energy Solution, it has laid the foundation to enhance competitiveness in the electrification sector, a core area of the future mobility industry.

Based on stable battery cell supply, Hyundai Mobis can accelerate battery system production expansion and technology development. Leveraging its extensive experience in battery system production and operation at domestic and overseas plants, it is also exploring ways to expand battery system supply beyond Hyundai and Kia.

Cost Reduction from Raw Materials to Vehicle Production, Advantageous for Securing Indonesian Government Incentives

The battery cell joint venture factory of Hyundai Motor Group and LG Energy Solution can minimize costs and time from raw material supply to battery cell manufacturing and even complete vehicle production.

The Indonesian government is strongly promoting the expansion of electric vehicle adoption and related industries, making it advantageous to secure various incentives, which significantly enhances the price competitiveness of electric vehicles. Based on this, they can actively target not only the Indonesian market?the largest automotive market in ASEAN with an annual volume of 1 million vehicles?but also the global electric vehicle market.

Since August 2019, Indonesia has been continuously raising the localization rate of parts, which serves as the basis for providing various incentives such as luxury tax exemptions for electric vehicles, through a presidential decree aimed at fostering and expanding the electric vehicle industry. Earlier this month, the government finalized the approval of an automotive tax-related bill that gradually increases the luxury tax rate on hybrid models, which is expected to further expand the electric vehicle market.

The battery cell joint venture factory is expected to play a key role in targeting the entire Asia-Pacific region market alongside Hyundai’s vehicle assembly plant in Indonesia.

Although the ASEAN market has high tariff barriers, with tariffs on finished vehicles reaching up to 80%, ASEAN Free Trade Area (AFTA) member countries provide duty-free benefits if the parts localization rate exceeds 40%. By producing battery cells locally in Indonesia, they can actively utilize these benefits.

Hyundai Motor Group and LG Energy Solution plan to further strengthen their strategic partnership, which has lasted over 10 years, to secure strong leadership not only in the ASEAN market but also in the global electric vehicle market through this joint venture factory establishment.

An LG Energy Solution official stated, "Through the establishment of the first overseas joint venture between a domestic battery company and an automaker group, we will maximize synergy creation and strengthen our global electric vehicle market strategy. We will continue to solidify the cooperative relationship between the two parties in the future."

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