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Indonesia, LG in $9.8B deal for first integrated EV battery industry

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An electric car powers up at a charging station in Beijing. Globally, China is on track to become the global leader in terms of EV production and consumption. AFP

Indonesia, LG in $9.8B deal for first integrated EV battery industry

Indonesia has sealed a deal worth $9.8 billion with South Korea’s LG Energy Solution to develop the world’s first integrated electric vehicle (EV) battery industry, Indonesia’s investment chief said on December 30.

The memorandum of understanding (MoU) was signed by Investment Coordinating Board (BKPM) head Bahlil Lahadalia and LG Energy Solution representatives in Seoul on December 18 with South Korean Minister of Trade, Industry and Energy Sung Yun-mo witnessing the signing.

The deal is the result of a series of negotiations that started with a meeting between President Joko “Jokowi” Widodo and his South Korean counterpart Moon Jae-in in Busan, South Korea in November 2019.

The MoU includes strategic investment projects in the EV battery cell industry that integrates the mining, smelting, refining, and precursor and cathode industries, according to a BKPM statement on December 30.

Bahlil told reporters in a virtual press briefing on December 30: “This investment will make Indonesia the first country in the world that is integrating the electric battery industry [supply chain], from mining to electric car lithium batteries.

“This is the biggest investment since the [1998] Reform Era and will serve as an opportunity for Indonesia to recover from the coronavirus pandemic.”

Indonesia’s pursuit to boost local EV production and the EV battery industry reflects Jokowi’s ambition for “massive downstreaming”, which aims to turn the country from a commodity-driven economy into an industrial one. At the same time, massive foreign investment in the sector is expected to help boost the country’s economic recovery.

The government ordered in October its biggest state-owned enterprises (SOEs) to establish a battery holding company that will develop an end-to-end domestic supply chain for EV batteries.

Under the MoU, LG Energy Solution, a subsidiary of LG Group, will collaborate with South Korea’s Hyundai Motor as well as the appointed SOEs – mining holding MIND.ID, oil and gas giant Pertamina, electricity giant PLN and metal miner PT Aneka Tambang (Antam) – to build the integrated battery plant, Bahlil said.

He said the investment would support the planned end-to-end domestic supply chain for EV batteries from nickel mining to battery recycling, adding that the government was also encouraging local companies to get involved.

Indonesia possesses almost a quarter of the global reserves of nickel, a key metal for electric vehicles, and is seeking to use that advantage to build a domestic battery industry with support from low power prices and low-cost manufacturing.

To that end, the government banned all nickel ore exports last year and plans to ban all metal ore exports starting June 2023, thereby forcing miners to process the ore domestically.

The investment by LG Energy Solution will be the latest in a series made by South Korean companies, including Hyundai Motor, which plans to set up an electric car factory.

Indonesia’s EV batteries will not only cater to the EV industry but also to the energy storage industry, both of which are expected to grow exponentially over the decade as major economies double-down on green energy commitments.

Indonesian Mining Association (IMA) executive director Djoko Widajanto told The Jakarta Post: “We are hoping that LG’s investment will be a breakthrough for SOEs to connect local businesses with the EV battery supply chain because otherwise, we will need time to develop both the technology and human resources.”

Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman Johnny Darmawan told the Post on December 30: “The government must allow these companies to use locally manufactured materials to produce the batteries in a bid to further support local businesses.

“If the government wants Indonesia to become a major player in the EV industry, then the country must be able to produce its own batteries.”

THE JAKARTA POST/ASIA NEWS NETWORK

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