Hyundai Motor Group announced it had agreed to establish a joint venture in Indonesia with its South Korean EV battery supplier LG Energy Solution to manufacture lithium-ion batteries for electric vehicles (EVs).

The two companies signed a Memorandum of Understanding (MoU) with the Indonesian government which has agreed to provide tax holidays and investment incentives for the new company.

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According to the agreement, Hyundai Motor Group, through its main module and systems subsidiary Hyundai Mobis, and LG Energy Solution will invest a combined US$1.1bn in the joint venture, with each company taking a 50% stake.

The signing ceremony was held in Seoul, attended by Hyundai Mobis president and CEO Sung Hwan Cho and LG Energy Solution president and CEO Jong Hyun Kim, with Indonesia investment minister Bahlil Lahadalia and president director of Indonesia Battery Corporation (IBC) Toto Nugroho joining the ceremony remotely.

Construction of a new plant in an industrial zone in Karawang, 70km east of Jakarta, is set to begin in the fourth quarter of 2021 with completion scheduled for the first half of 2023.

The plant will have an initial manufacturing capacity of 10 GWh of lithium-ion battery cells per year, enough to power more than 150,000 EVs. Mass production is scheduled to begin in the first half of 2024.

The plant will supply batteries for Hyundai and Kia EV models built on the group’s dedicated Electric-Global Modular Platform (E-GMP).

Hyundai said in a statement: “The new factory will help Hyundai and Kia produce vehicles with high efficiency, performance and safety by supplying battery cells optimised for the two automakers’ BEV models.”

Indonesia is one of the world’s largest producers of nickel, a key raw material used in EV batteries. The Indonesian government has been looking to develop an EV industry ecosystem so the country can play a pivotal role in the global EV industry.

Hyundai Motor Group added: “The joint venture will help Hyundai and Kia secure a stable supply of batteries at a competitive price for our upcoming EVs.” It plans to expand its EV lineup to 23 models and generate global annual sales of 1m EVs by 2025.