A car is plugged in at a charging point for electric vehicles in London, Britain, on March 6, 2018. (REUTERS/Simon Dawson)
Adrian Wail Akhlas The Jakarta Post
Jakarta / Wed, December 30, 2020 / 07:26 pm
Indonesia has sealed a deal worth US$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 Wednesday.
The memorandum of understanding (MoU) was signed by Investment Coordinating Board (BKPM) head Bahlil Lahadalia and LG Energy Solution representatives in Seoul on Dec. 18 with South Korean Trade, Industry and Energy Minister 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 Wednesday.
“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,” Bahlil told reporters in a virtual press briefing on Wednesday. “This is the biggest investment since the  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 welcomed the deal, saying it would help develop the EV battery industry and support SOE development.
“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,” he told The Jakarta Post.
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman Johnny Darmawan expressed a similar view, saying the country had enough raw materials to make batteries for electrified vehicles but lacked the technology needed to develop the industry.
“The government must allow these companies to use locally manufactured materials to produce the batteries in a bid to further support local businesses,” he told the Post on Wednesday. “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.”
Samuel Sekuritas equity analyst Dessy Lapagu expressed optimism that the deal would be positive for the mining industry, especially nickel producers.
“But the downside risk stems from the rising nickel price, which could affect investors’ buying power to absorb Indonesia’s nickel products,” she told the Post. “Meanwhile, nickel exploration conducted by new miners may need more time and capital.”