Hyundai, LG to Build Battery Factory in Indonesia

Hyundai and LG Energy Solution are joining hands to build an electric-car battery factory in Indonesia in a rare tie-up between two of Korea's traditionally fractious conglomerates.

Hyundai said Thursday it signed an investment deal with the Indonesian government to build the joint venture in Karawang on the island of Java.

Hyundai and LG Energy Solution will go halves and each invest US$1.1 billion. The factory will have an annual production capacity of 10GWh, which is enough to power 150,000 electric cars. That allows Hyundai to secure a steady battery supply as well as a bridgehead into the Southeast Asian market for electric vehicles, while LG Energy Solution gains a production base in the region on top of its factories in Northeast Asia, North America and Europe.

Indonesia offered huge incentives to bring the factory to Karawang. Located just 65 km from Jakarta, the industrial region is well-connected to highways, ports and an airport. It is also located just 10 km from a new car plant Hyundai is building there.

Hyundai and LG Energy Solution hope to break ground within this year and complete the factory in the first half of 2023 with production starting the following year. It will supply Hyundai and affiliate Kia.

The two companies picked Indonesia because of its abundant raw materials and cheaper labor. Indonesia has the world's largest reserves of nickel, which is a key component of rechargeable batteries, and vast amounts of cobalt, copper and manganese.

ASEAN offers exemptions on tariffs for EVs containing more than 40 percent of components procured from the region. The Indonesian government promised the venture a 20-percent corporate tax cut and is waiving tariffs from five to 10 percent on components and other facilities.