South Korea’s carmaker Hyundai and LG Energy Solution began construction on Wednesday of an electric vehicle battery plant near the Indonesian capital amid Jakarta’s push to become a regional manufacturing hub.
Indonesian President Joko “Jokowi” Widodo oversaw the ground-breaking ceremony of the U.S. $1.1 billion (15.6 trillion rupiah) plant in Karawang, a regency in West Java province.
“We should be grateful that today we can witness the groundbreaking of the construction of the first electric vehicle battery factory in Indonesia and even the first in Southeast Asia,” Jokowi told those attending the ceremony.
The plant is being constructed by a consortium of South Korean companies including Hyundai Motor Co., KIA Corp., Hyundai Mobile and LG Energy Solution in cooperation with PT Industri Battery Indonesia, a joint venture of state-owned energy and mining companies. It is to be built on an 81-acre plot in the Karawang New Industry City complex.
The Hyundai-LG Energy Solution plant is part of a $9.8 billion (139.5 trillion rupiah) electric vehicle battery deal between Indonesia and South Korea signed in Seoul last year.
When finished, it is expected to be capable of producing nickel-cobalt-manganese-aluminum lithium-ion battery cells to power 150,000 electric vehicles per year. Battery production is expected to start in two years.
Indonesia, which mined 800,000 tons of nickel in 2019, is the world’s largest producer, according to the Ministry of Energy and Mineral Resources. The nation bans exports of nickel ore to maintain reserves and encourage the domestic nickel smelter industry.
“The nickel industry will significantly increase the added value of nickel ore. If it becomes batteries, its value can increase six- to seven-fold, and if it becomes electric cars, the value will increase 11-fold,” Jokowi said.
Indonesia is seeking to develop industries to produce electric vehicles and the batteries to power them, and has set a goal of electric vehicles accounting for 20 percent of those manufactured by 2025. The nation produces about 1 million vehicles per year – none of them are electric.
Hyundai Motor Chairman Euisun Chung expressed hope that the plant would turn Indonesia into a major player in the electric vehicle (EV) industry.
“Through the development of these industries, an EV ecosystem will be successfully developed in Indonesia, and furthermore I am confident Indonesia will play a key role as the hub of Southeast Asia’s EVs market,” Chung said, according to Reuters news service.
LG Energy Solution chief executive Kim Jong-hyun said he was optimistic that the location of the plant within a cluster of industries such as automotive, electronics, building materials, food and logistics, would support business development for a wider target market.
“Indonesia’s good environment and conditions are a stepping stone. We will actively develop this joint factory as the main base toward the global electric vehicle market outside the ASEAN market,” Jong-hyun said in a speech delivered online.
“When the factory is completed, Indonesia will be one step closer to building the world’s first integrated electric vehicle supply chain,” he said.
Indonesian Investment Minister Bahlil Lahadalia said the plant should create jobs for locals.
“In the Memorandum of Understanding, we emphasize that jobs must go to as many locals as possible, not foreigners,” Bahlil said.
Smelter plans
The South Korean consortium also plans to build a nickel smelter plant in the Batang Integrated Industrial Estate in Central Java province.
“The location is ready. God willing, most likely by the end of this year we will start construction,” Bahlil said.
In mid-June, Energy and Mineral Resources Minister Arifin Tasrif said the government is targeting construction of 53 smelters by 2024. Currently, 19 smelters are under construction, of which 13 are used for nickel processing, followed by bauxite and copper.
A report released by U.S. investment bank Morgan Stanley at the end of 2020 predicted that Indonesia’s commodity drivers would shift from coal to nickel, supported by a significant increase in investment from China. The demand for nickel that is used in electric vehicles, is projected to rise 12 percent in 2025 and 23 percent in 2030.
Chinese companies including Tsingshan Holding Group and De Long Nickel Co Ltd. have invested $6 billion (85.4 trillion rupiah) in the Indonesian nickel industry.
Meanwhile, China’s Contemporary Amperex Technology (CATL) plans to invest $5 billion in a lithium battery plant in Indonesia, to be built in 2024, the government said last year.