Hyundai Motor-LG Chem, Indonesian Battery Joint Venture Formation Becomes Visible

[Asia Economy Reporter Park So-yeon] The Indonesian Minister of State-Owned Enterprises and the Head of the Investment Coordinating Board visited Seoul to finalize the establishment of a battery factory by Hyundai Motor and LG Chem in Indonesia. The plan to establish an overseas joint venture for electric vehicle batteries, which the two companies have been promoting, is expected to accelerate.

◇Indonesia's Strong 'Love Call' Toward K-Mobility= According to related industries and local media on the 24th, Eric Thohir, Indonesian Minister of State-Owned Enterprises, and Bahlil Lahadalia, Head of the Investment Coordinating Board, departed from Halim Perdanakusuma Airport in East Jakarta by private plane the previous evening and arrived in Seoul that morning. Before departure, Bahlil said, "I will go to Korea to resolve the electric vehicle battery issue." He added, "This project will be a global investment. The (battery) factory will be built on a 100-hectare site in Batang," and "Indonesia has been exporting nickel ore, but with the establishment of a lithium battery factory, it will gain added value." Minister Eric also said on the 16th, "We are striving to create added value by expanding from the mining industry to downstream businesses such as battery production," and "I will visit Korea to have direct meetings."

During their visit to Seoul, they are expected to discuss the conditions for establishing the battery factory and package investments related to mining businesses through meetings with Korean companies such as Hyundai Motor and LG Chem. Hyundai Motor and LG Chem have been discussing the establishment of a joint venture for electric vehicle batteries in Southeast Asian countries. Indonesia has been considered a strong candidate for the joint venture site, likely due to Hyundai Motor's recent investment in an automobile factory in Indonesia.

The Indonesian government, a producer of nickel, cobalt, and manganese used in batteries, is also making efforts to attract the battery factory. Indonesian President Joko Widodo inspected the Batang industrial complex on June 30 and said, "For example, if LG wants to come in tomorrow, they should come right away," adding, "(LG) has nothing to worry about. The Head of the Investment Coordinating Board, the governor, and the regent here will fully support them." At the time, the Indonesian government stated in a briefing that LG Chem was among the foreign companies discussing relocation and factory construction in Indonesia, with LG Chem planning to invest $9.8 billion (11.8 trillion KRW) and employ 14,000 people. LG Chem and Hyundai Motor are reportedly considering not only the Batang industrial complex but also Bekasi, where Hyundai Motor is building a factory, and the nearby Karawang area.

Indonesian Minister of State-Owned Enterprises
Leads Investment Coordinating Board to Visit Seoul
Actively Calls to Attract Factory

◇Hyundai Motor-LG Group, Moving to Secure Southeast Asian Market= The joint venture between Hyundai Motor and LG Chem is expected to handle everything from manufacturing electric vehicle battery cells to battery packs and system production. Although the exact investment scale and timing have not been finalized, the joint venture shareholding ratio is likely to be Hyundai Motor 51% and LG Chem 49%. The two companies have been in discussions for a considerable period and are understood to be negotiating with authorities on various tax incentives and support related to establishing the local factory.

In November last year, Hyundai Motor announced plans to build a complete vehicle factory in the Deltamas industrial complex in Bekasi, about 40 km east of Jakarta, the capital of Indonesia. The factory aims to operate with an annual production capacity of 150,000 units by the end of 2021 and expand to 250,000 units annually by 2030. Hyundai Motor plans to develop this factory as a strategic base for ASEAN.

LG Chem is understood to be pursuing the joint venture with Hyundai Motor to secure a stable battery supply source and reduce investment burdens. As part of its strategy to expand its electric vehicle battery business, LG Chem has been promoting the establishment of joint ventures with major automakers such as General Motors (GM) in key regions.

Since there has been no case of an electric vehicle battery factory established in Southeast Asia to date, the joint venture is expected to become a milestone if realized. In particular, Kia plans to produce electric vehicles such as the Seltos in Indonesia, making the candidate sites optimal for both parties.