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Indonesia-South Korea Joint Work for EV Ecosystem Development

Marking the 50th anniversary of Indonesia-South Korea bilateral relations, President Joko Widodo (Jokowi) received the visit of South Korean President Yoon Suk Yeol in Jakarta in September 2023.

The two leaders discussed the strengthening of economic cooperation and increasing the trade value and investment of the two countries.

On the same occasion, the Indonesian and South Korean governments signed a memorandum of understanding (MoU) for the electric vehicle (EV) ecosystem.

The cooperation plan in the MoU covers all means of transportation powered by electricity, such as battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs), to support development of the EV ecosystem in Indonesia.

Through the MoU, the two countries agreed to cooperate in building infrastructure for production, charging, and maintenance; carrying out training and exchange of workers for maintenance, manufacture, and research on the EV ecosystem; as well as improving the system and policy for the expansion of electric mobility.

The signing of the MoU is in line with discussions between the two heads of state to encourage the development of the EV industry by accelerating Korean companies’ investment in Indonesia, one of which is the LG Consortium’s Grand Package project for the construction of a cathode factory in Batang, Central Java, and a battery cell factory in Karawang, West Java.

Going forward, cooperation in the automotive sector, especially in the EV battery ecosystem, becomes a target for the strengthening of cooperation between the two countries, as South Korea is well-known for being highly advanced in energy storage technology.

South Korea’s technological advantages are deemed suitable to be combined with the potential of Indonesia, which is home to the world’s largest nickel reserves, to produce EV batteries that can be marketed globally.

“The advantage of this nickel-based battery is that it has a larger energy storage capacity, which EVs can use for longer trips,” Deputy for Investment Promotion at the Indonesian Ministry of Investment, Nurul Ichwan, stated in a workshop organized by the Foreign Policy Community of Indonesia and Korea Foundation in late October of 2023.

By inviting countries, such as South Korea, that have the technology and capital as well as are famous in the global market, Indonesia hopes to encourage the industrial downstreaming policy to create added value for Indonesia’s raw materials.

“This is what Indonesia is proposing. We want to invite you to cooperate in industrial downstreaming, and Korea is one of the countries that we consider advanced and can respond to this very positively,” Ichwan remarked.

“They do not force us to do something that will only benefit Korea but jointly build the EV battery ecosystem in Indonesia, whose industry is led by Korean companies,” he remarked.

In building the EV ecosystem, Indonesia is working with South Korea to implement an initial strategy, namely inviting downstream industries first, with the hope that it will be followed by the upstream industry.

This invitation was positively welcomed by South Korea’s Hyundai Motor Group and LG Energy Solution, which built their first battery cell and battery system factories in Indonesia under PT Hyundai LG Industry (HLI) Green Power, a joint venture company between Hyundai Motor Group and LG Energy Solution.

HLI’s battery cell factory is built over an area spanning 330 thousand square meters in Karawang, West Java, with investment funds reaching US$1.1 billion.

The facility can produce lithium-ion battery cells, with a total capacity of 10 GWh per year, to meet the needs of more than 150 thousand units of BEVs.

Meanwhile, the battery system factory of Hyundai Energy Indonesia is built over an area of 32,188 square meters in Cikarang, West Java, with funding of US$60 million. The factory is targeted to be able to produce 50 thousand units of battery system assembly (BSA) for BEVs per year.

The two battery factories will operate continuously to supply battery cells and battery systems to Hyundai BEVs that are produced domestically by PT Hyundai Motor Manufacturing Indonesia.

When the mass production of battery cells and battery systems starts in April 2024, EVs with locally-made batteries will be produced for the first time in Indonesia.

With a production target of 30 million battery cells that can be used to produce approximately 180 thousand cars, PT HLI will become the largest EV battery producer in Southeast Asia.

“This is a clear indication that in the future, at least in 2025 or 2030, no country interested in nickel and EV batteries can ignore Indonesia. The reason is because Indonesia will dominate 30 percent of the global nickel supply for EV batteries,” Ichwan remarked.

Chair of the Korean Chamber of Commerce and Industry in Indonesia, Lee Kang Hyun, assessed that President Jokowi’s government has prepared a clear and comprehensive road map for developing a green economy in Indonesia, including building an EV ecosystem.

However, as compared to other countries, such as South Korea, Indonesia is deemed a bit late in starting.

South Korea has been working on green energy in all fields for almost a decade. The country’s EV ecosystem has also advanced towards achieving zero emissions.

Hyundai Motor, for instance, has been famous as one of the pioneers in the electric car industry with its products, such as the IONIQ 5.

Although the market share for Hyundai products in Indonesia has only reached around five percent, the South Korean auto giant is aiming to continue to advance its products and seize the share of the vehicle market in Indonesia, which has been dominated by Japan for the last 50 years.

Regarding the development of EVs in Indonesia, Lee underscored the need to increase the number of charging stations for EVs. He noted that Hyundai is still working on collaboration regarding this matter with Indonesia’s state-owned toll road operator PT Jasa Marga and state electricity company PT PLN.

It is deemed necessary for the Indonesian government to prepare regulations for developing more charging stations, for instance, by necessitating the presence of new buildings to build EV charging stations.

Moreover, expanding the market of EVs is also considered necessary. One of the policies that can be implemented is procuring EVs for government vehicles, and the government must also be consistent in determining the direction of the policy for the composition of domestic component level (TKDN) for EVs.

He assessed that the consistency of policymakers is essential to maintaining the investment climate and the confidence of investors that have invested in Indonesia, including those from Korea.

The Indonesia-South Korea cooperation, which combines the two countries’ potentials, is expected to support the realization of competitiveness of the EV industry.

Through various efforts to accelerate the construction of infrastructure and supporting facilities, the EV ecosystem is expected to continue to grow.

Source: Antara News