Hyundai Motor, a South Korean company, is constructing a complete electric vehicle ( EV ) supply chain in Indonesia in accordance with the country’s policy of moving away from raw mineral exports to more value-added production.
In early July, Hyundai LG Indonesia Green Power ( HLI Green Power ), a joint venture between Hyundai Motor and LG Energy Solution, announced the completion of a new factory in Karawang New Industry City, near Jakarta, the capital. Since then, the new service has started producing Vehicle batteries.  ,
The chargers will power the novel KONA Electric SUV, which Hyundai Motor manufactures in Cikarang. Hyundai Motor Manufacturing Indonesia, which was established in 2019, started building Vehicles it in 2022.
Hyundai Motor is South Korea’s largest manufacturer and, together with its advertising Kia, is now the third-largest manufacturer in the world. LG Energy Solution is the nation’s third-largest maker of EV chargers after China’s CATL and BYD. It is a company of LG Chem, South Korea’s largest chemistry business.
Karawang New Industry City operates industrial gardens dedicated to the car, consumer electronics, building materials and foods sectors, small and medium-sized enterprises, and a logistics support centre. It has quick exposure to the road and rail networks of the island of Java and is close to waterways and terminals.
The Indonesian state, LG Energy Solution, LG Chem, and their associated trading business LX International are all working to establish a comprehensive Vehicle production supply chain that covers everything from battery production and vehicle assembly to EV charging infrastructure and used battery recycling.
At the HLI Green Power’s stock implementation service, cheerful, two-term Indonesian President Joko Widodo said,” We have entered a new age that will lead our country to become a world player. We are now in a position to win with a program that covers every stage of EV generation.
Chung Euisun, the executive director of Hyundai Motor Group, stated that” we are shaping the future of the EV habitat not only in Asia but also around the world.”
That has always been the two parties ‘ strategy. LG Energy Solution CEO Kim Jong-hyun stated at the company’s groundbreaking ceremony in 2021 that” we will constantly develop this stock as a main center toward the global electric car industry beyond ASEAN” by using Indonesia as a stepping stone.
The “golden age of raw material commodities has come to an end,” according to Widodo at the time, indicating his intention to move Indonesia up the value chain.
” We have to boldly change the commodity-based economic structure to downstream and industrialization ,]to] become a powerful nation based on the development of technology innovations”.
In May of this year, Widodo said,” For years, we have always exported raw materials. This is a mistake that we must not make again.
Indonesia is the world’s largest producer of nickel, the key ingredient in LG Energy Solution’s NCMA ( Nickel-Cobalt-Manganese-Aluminum ) batteries. According to US Geological Survey and other source data, Indonesia accounts for about 20 % of the world’s total nickel reserves and is now the source of more than 40 % of that amount.
In 2020, Widodo reinstated a previously unsuccessful ban on the export of raw nickel ore. Following this, restrictions on the export of bauxite ( aluminum ore ), iron ore, unprocessed copper, lead, zinc, and gold were lifted, but these restrictions have since been relaxed to allow businesses to build smelters.
This lurch toward so-called “resource nationalism” initially drew heavy criticism, even in Indonesia. In April 2022, the Jakarta Post wrote,” Indonesia’s claim that banning nickel exports spurs downstreaming is , questionable”.
However, the paper quickly changed its mind, stating in August 2023 that” The government is taking bold steps toward unlocking the full potential of its rich mineral resources by implementing a forward-thinking export restriction policy on minerals.”
Since the reinstatement of the export ban on unprocessed ore, Indonesian nickel product exports have increased by more than 12 times, led by stainless steel and nickel matte, which are used in the production of battery materials.
The European Commission (EC ) responded by bringing the matter before the World Trade Organization ( WTO ) and claiming that the “export ban on nickel ore and domestic processing requirements on nickel ore and iron ore… illegally restrict EU steel producers ‘ access to raw materials needed for stainless steel production.”
In October 2022, the WTO made a decision in favor of the EU, but Indonesia appealed, and the dispute is still unresolved as US officials continue to thwart appointments to the WTO’s Appellate Body.
In March 2024, Widodo said,” If there will be a second chance at appeal, we will submit another one. In short, do n’t back down until our nickel-based industries are ready to operate”.
He added,” If we back down, do n’t expect this country to become a developed country. There will undoubtedly be someone who will sue us once more. We will fight again”.
Unidentified Indonesian officials, who was cited by Japan’s NHK, were more at ease with the situation. ” Indonesia has rich natural resources and a large population”, he said,” We are one of the ‘ haves.’ Although it may take some time, Indonesia has the potential to develop into a developed country.
Indonesia’s export ban caused the Chinese to build dozens of smelters in the nation, where they produced more than 80 % of the local nickel used in EV batteries.
According to the Center for Strategic and International Studies, a Washington, DC-based think tank, the number of nickel smelters in Indonesia grew from 13 in 2020 to 43 by July 2023, with another 28 under construction – most of them controlled by Chinese companies.
The US, which has only 1 % of the world’s nickel reserves, is ringing alarm bells. The Biden administration has been trying to persuade Indonesia to diversify away from China, according to a Comprehensive Strategic Partnership established in 2023.
A proposed Critical Minerals Specific Free Trade Agreement, which would grant tax credits to Indonesian companies involved in the EV supply chain, is included in this effort.
The US-ASEAN Business Council believes that it will be based on a similar agreement reached between the US and Japan in March 2023. That deal’s provisions include:
- Domestic measures to address non-market practices and policies that other nations have that have an impact on the trade of crucial minerals
- Best practices for foreign entities reviewing investments made within their respective regions in the crucial minerals sector
- Engagement, information-sharing and enforcement actions related to labor rights in critical minerals extraction and processing, ]and]
- Promoting employer-neutrality in union operations and organizing
- Non-imposition of export duties on critical minerals
These measures, which are aimed at combating resource nationalism and China’s mining and smelting industries, are viewed by some as US interference in the partner nation’s domestic affairs.
The US-ASEAN Business Council claims that the Indonesian government has expressed interest in a more limited agreement largely because of this.
Regardless, this is all working in Indonesia’s favor, whether or not it is intended, like the US blockade of the WTO Appellate Body.
In order to be eligible for US tax credits, Chinese companies are reportedly attempting to reduce their stakes in Indonesian nickel smelters to 25 % or less as reported by Reuters on July 26. This reduces the risk of a near-monopoly, giving Indonesia more room to maneuver.
According to the independent think tank The Australian Strategic Policy Institute ( ASPI),” Indonesia’s success in utilizing Chinese capital and innovation to become the dominant force in the global nickel industry has been achieved in the face of concerted opposition from the European Union through the World Trade Organization.”
” Over a decade, the high value-added share of Indonesia’s nickel exports has gone from 8 % to 100 %. Its mine output has risen nine-fold, and it is putting rivals, including nickel miners in Australia, out of business because they cannot begin to match the capital and operating costs of the Indonesian operations”, ASPI said.
The most significant accomplishment of China’s Belt and Road program could be seen as enabling Indonesia to take its place in one of the most significant new energy industries.
Meanwhile, HLI Green Power is starting with battery manufacturing capacity sufficient to equip 150, 000 Hyundai Motor EVs per year, with plans to triple that figure to 450, 000 when market demand grows.
In contrast, according to Asian Automotive Analysis, about 1.2 million passenger vehicles were produced in Indonesia in 2023, the majority of which were produced by Toyota, Daihatsu, and Mitsubishi Motors. This near-monopoly is also under threat.
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