Hyundai Motor Company and LG Chem Pursue a Joint Venture Battery Company in Indonesia

Jun 23, 2020

Hyundai Motor Company and LG Chem are pushing for a plan that will establish a joint venture company for electric vehicles in South-East Asia. Indonesia is considered as a top candidate. There are common interests amongst companies and the government involved as Hyundai Motor Company is constructing a automobile factory in order to target the ASEAN market while the Indonesian Government is looking to attract companies to its country.
Hyundai Motor Company and LG Chem are currently discussing about establishing a joint venture company that will target the entire South-East Asian market. Their joint venture company will be responsible for manufacturing battery cells for electric vehicles and battery packs and battery systems that will go into electric vehicles. Although the exact investment size and timing are not decided yet, it is heard that Hyundai Motor Company and LG Chem will own 51% and 49% of the shares of their joint venture company. It is understood that the two companies have had discussions for a long period of time and that they are discussing with Indonesian authorities about incentives such as various tax benefits for their joint venture company. However, final discussion between them and authorities will take place in the second half due to the spread of COVID-19.
It is likely that they will set up their joint venture company in Indonesia because Hyundai Motor Company recently started investing in Indonesia for its new automobile factory. In November last year, Hyundai Motor Company announced that it would construct an automobile factory in Kota Deltamas, Bekasi that is about 40km east of Jakarta. The corresponding factory will produce 150,000 and 250,000 cars annually by the end of 2021 and 2030 respectively.
Hyundai Motor Company will promote its new automobile factory in Indonesia as the strategic base to target the ASEAN market. Due to current regulations on tariff imposed on finished automobiles and various non-tariff regulations that differ depending on a country within the ASEAN market, it is difficult to target the ASEAN market without having a production base on site. It seems that Hyundai Motor Company’s strategy takes account of current ASEAN regulations because a company is given benefits such as tax exemption if it manufactures at least 40% of parts and components locally based on the current AFTA (ASEAN Free Trade Agreement).

Hyundai Motor Group’s management team visited LG Chem’s Ochang Plant on June 22 and discussed with LG Group’s management team about different ways to work together for electric vehicle battery sector.  Executive Vice Chairman Chung Eui-sun (L) of Hyundai Motor Group and Chairman Koo Kwang-mo of LG Group are having a handshake in front of Ochang Plant’s main building. <Hyundai Motor Group’s management team visited LG Chem’s Ochang Plant on June 22 and discussed with LG Group’s management team about different ways to work together for electric vehicle battery sector. Executive Vice Chairman Chung Eui-sun (L) of Hyundai Motor Group and Chairman Koo Kwang-mo of LG Group are having a handshake in front of Ochang Plant’s main building.>

It seems that LG Chem is pushing for a joint venture company with Hyundai Motor Company in order to secure a stable buyer for its batteries and to lessen financial burden from investment. LG Chem has been pursuing setting up joint venture companies with automotive manufacturers such as General Motors in important countries in order to expand its electric vehicle battery business.
Because there is yet to be any electric vehicle battery plant in South-East Asia, their joint venture company will be an important milestone if their plan for a joint venture company is accomplished. This is the first time when a multinational automotive manufacturer and a multinational battery maker are pursuing a joint venture company. Because Kia Motors is planning to produce its electric vehicles such as Seltos in Indonesia, Indonesia is considered as an optimal candidate for both Hyundai Motor Company and LG Chem.
Hyundai Motor Company and LG Chem announced that Executive Vice Chairman Chung Eui-sun of Hyundai Motor Company and Chairman Koo Kwang-mo of LG had their first official meeting on June 22. Executive Vice Chairman Chung and Chairman Koo looked around LG Chem’s electric vehicle battery production line in Ochang Plant and discussed about comprehensive ways of cooperation related to electric vehicle. Management team from Hyundai Motor Group shared future battery technologies such as long-lived battery, lithium-sulfur battery, and all-solid-state battery that are currently developed by LG Chem and the direction for development.
LG Chem and Hyundai Mobis established an electric vehicle battery pack maker called HL Green Power. Hyundai Motor Company’s electric vehicles usually use LG Chem’s batteries. Hyundai Motor Company’s electric vehicle platform that will be launched in 2022 will also use LG Chem’s batteries. “Although COVID-19 will have some impact on discussions taking place, Hyundai Motor Company and LG Chem already had a consensus on a joint venture company.” said a representative for the financial world. Spokespeople for Hyundai Motor Company and LG Chem stated that although the two companies are currently discussing about various way for cooperation, there is nothing that has been determined yet.
Staff Reporter Yun, Geonil | benyun@etnews.com & Staff Reporter Park, Taejoon | gaius@etnews.com

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