Hyundai Motor Group Chairman Chung Eui-sun shakes hands with LG Group Chairman Koo Kwang-mo as the former toured LG Chem’s plant in Ochang, Chungcheongbuk-do. (Photos: Hyundai Motor Group)

LG Energy Solution and Hyundai Motor will set up Indonesia’s first EV battery plant. It will be the first EV battery plant to be built in Southeast Asia, including Indonesia.

The two companies’ agreement on the Indonesian EV battery center came after two years of talks. The so-called EV battery alliance may be construed as a bid to secure an upper hand in Southeast Asia, which is emerging as an EV market.

The Korean automaker joining forces with the EV battery maker to explore overseas markets may be evaluated as a technology alliance among Korean companies.

Hyundai Motor has made every effort to make inroads into the ASEAN (Association of Southeast Asian Nations) market. Hyundai Motor has been accelerating efforts to raise car sales since 2017 when the automaker inaugurated a department in charge of the exploring the ASEAN market.

As part of these efforts, the automaker invested $1.55 billion to build a car plant in Bekasi, 40 km east of Jakarta.

Hyundai Motor’s car production plant in Indonesia is a kind of localization strategy, designed to cope with tariffs, varying to 5 percent up to 80 percent according to ASEAN member countries and diverse non-tariff barriers each country has imposed to protect its own car industry.

Hyundai Motor’s car plant, capable of producing 250,000 units per annum in Indonesia, is to be test-operated starting May before mass production slated for late this year. The plant is known to produce EV cars tailored to explore the ASEAN market.

If the Indonesian car plant is utilized as a car production center targeting the ASEAN market, Hyundai Mobility Global Innovation Center (HMGICs), being built in Singapore, is expected to serve as a test-bed for EV producing platforms for the ASEAN market. HMGICs is to be dedicated in the second half of next year.

The global market survey firm Frost and Sullivan reported that ASEAN member countries are aggressively pushing to expand the spread of EVs.

Indonesia, Singapore and Thailand aim to supply 2.01 million EV units by 2025, 530,000 units by 2050 and 1.2 million units by 2036, respectively.

LG Energy Solution says it will expand the EV battery business by building a plant in Indonesia. Currently, the company has production centers in major continents such as Asia, including in Korea (Cheongju, Chungcheongbuk-do), Europe and North America.

A view of Hyundai Motor EV car IONIQ 5.

The upcoming Indonesian plant will be added to the current production centers. LG Energy Solution will see its EV battery production capacity jump from 120GWh late last year to 260GWh in 2023 when the Indonesian will go into mass production.

Picking Indonesia as the EV battery site for the ASEAN market is based on the fact that the Southeast Asian country has rich natural resources, such as nickel, cobalt and manganese, the raw materials for EV batteries.

The Indonesian government’s strong will to nurture the EV industry also played a part. The Indonesian government announced a plan to become an EV industry hub based on its country’s rich resources in April 2021.

It devoted itself to attracting to its country the EV battery joint-venture by Hyundai Motor and LG Energy Solution.

With the establishment of the Indonesian plant, Hyundai Motor‘s EV battery alliance with LG Energy Solution will likely be further solidified.

The automaker’s alliance with the EV battery maker will be suggested as a technology alliance model among Korean companies, a business source said.