'1% Market Share' Unknown Indonesian Car Market... Hyundai Motor Group and LG Energy Solution Launch Full-Scale Attack (Comprehensive)

Hyundai Motor Group and LG Energy Solution Target Southeast Asia Using Indonesia as a Foothold

[Asia Economy Reporters Changhwan Lee and Yoonju Hwang] The decision by Hyundai Motor Group and LG Group to jointly build a battery cell factory in Indonesia is interpreted as a convergence of their mutual interests to minimize costs and time from raw material supply through battery cell manufacturing to complete vehicle production, thereby leading the global electric vehicle market.

Industry experts evaluate that amid intensifying competition among global companies to secure the future electric vehicle market, the cooperation between the two companies will serve as an opportunity to further enhance South Korea's competitiveness in electric vehicle manufacturing.

President Jo Seong-hwan of Hyundai Mobis (front row left), President Kim Jong-hyun of LG Energy Solution (front row right), Minister Bahlil Lahadalia of the Indonesian Investment Coordinating Board (back row left on screen), and Toto Nugroho, CEO of the Indonesian State Battery Corporation (IBC) (back row right on screen) attended the signing ceremony both online and offline.

Southeast Asia's Largest Automotive Market + Government Support Will

Indonesia has the largest automotive market in Southeast Asia, with annual vehicle sales reaching approximately 1 million units. Since 2010, its average annual economic growth rate has been about 5%, and due to low vehicle penetration, the automotive market is expected to grow significantly in the future. Nevertheless, Hyundai's local market share is still below 1%, indicating considerable room for expansion.

The government's commitment to supporting the electric vehicle industry is also clear. In August 2019, the Indonesian government issued a presidential decree to foster and expand the electric vehicle industry, continuously raising the localization rate of parts, which serves as the basis for various incentives such as exemption from luxury tax on electric vehicles.

Additionally, earlier this month, the government finalized legislation to gradually increase the luxury tax rate on hybrid models, which is expected to further expand the electric vehicle market.

Indonesia is also rich in battery-related resources. It ranks first globally in both reserves and mining of nickel, a key material for batteries.

Hyundai Motor has already invested 1.8 trillion KRW to build a complete vehicle factory in the Bekasi area of Indonesia. The Bekasi plant, scheduled to begin full operation by the end of this year, will produce a variety of models including internal combustion engine vehicles and electric vehicles. A significant portion of the electric vehicle batteries produced at the joint battery cell factory with LG Energy Solution is expected to be supplied to the Bekasi plant.

Hyundai plans to actively target the entire ASEAN market using Indonesia as a base. The ASEAN market has high tariff barriers, with off-shore tariffs on complete vehicles reaching up to 80%. However, under the ASEAN Free Trade Agreement (AFTA), tariff exemptions are granted if the parts localization rate exceeds 40%, so producing battery cells locally in Indonesia allows Hyundai to actively utilize these benefits.

A Hyundai Motor Group official emphasized, "Through this joint factory, we plan to secure batteries that combine price competitiveness, technology, and world-class quality stably, and actively pursue the ASEAN region, which will be a key market for future electric vehicles."

Status of Karawang Industrial Complex and Nearby Infrastructure Where the Battery Cell Joint Venture Factory Will Be Established

LG Energy Solution Completes Global Five-Point Production System

With this joint venture, LG Energy Solution completes a global five-point production system spanning the United States, Europe, China, South Korea, and Southeast Asia. Compared to CATL, which is focused mainly on the Chinese market while competing for the top spot, this marks a significant achievement in establishing production bases worldwide.

Previously, LG Energy Solution announced plans to expand its global battery production capacity to 260 GWh by 2023. Currently, it operates battery production facilities in the U.S. (5 GWh), Europe (70 GWh), China (20 GWh), and South Korea (10 GWh). By establishing a Southeast Asian production base with Hyundai, this capacity will significantly increase to 280 GWh by 2025.

The battery cells produced at the joint factory 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 next-generation battery cells will be installed in Hyundai and Kia electric vehicles starting in 2024, amid fierce competition in high-output, high-spec batteries.

It is also noteworthy that LG Energy Solution is entering global key bases by forming joint ventures with major automakers. In the U.S., it has established a battery joint venture with GM, the top automaker, aiming to increase annual production capacity to 75 GWh by 2025.

An industry insider said, "Forming joint ventures with automakers makes it easier to secure battery supply volumes. Since the Southeast Asian electric vehicle market is still in its early stages, both Hyundai and LG Energy Solution have the advantage of being able to secure market leadership."

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