Indonesia signs $9.8bn EV battery agreement with LG

Proposed plant will use materials mined and smelted within the country

A fleet of trucks queue near a nickel laterite mine outside Kendari in south-east Sulawesi province, Indonesia. As one of the world's biggest producers of nickel ore, Indonesia aims to start processinShow more

Indonesia and a unit of LG Group, South Korea's fourth-largest conglomerate, signed a memorandum of understanding on a $9.8 billion electric vehicle (EV) battery investment deal, the government said on Wednesday.

The deal includes investments across the EV supply chain and was signed on December 18, Reuters reported.

The agreement will see Indonesia become the first country in the world to integrate the electric battery industry from mining to producing electric car lithium batteries, according to Bahlil Lahadalia, head of the Investment Coordinating Board.

"We have signed an MoU for the construction of an integrated electric battery factory from upstream to downstream," he added.

"Mines, smelters, precursors, cathodes, cars to recycling facilities will be built in Indonesia."

The project will be located in North Maluku and Central Java, he said.

Under the deal, at least 70 per cent of the nickel ore used to produce the EV batteries must be processed in Indonesia, Mr Bahlil said.

Indonesia, the world's biggest producers of nickel ore, aims to start processing its rich supplies of nickel laterite ore for use in lithium batteries as part of a bid to eventually become a global hub for producing and exporting EVs.

The global EV battery market is expected to grow by $44.2 billion from 2020 to 2024, according to a report by global market research company Technavio.

"The rapid spread of the novel coronavirus significantly affected the automotive industry as well as the sales of EVs," the report said. "This resulted in a reduction in the demand for EV batteries in the short-term. However, with conditions getting back to normal and automakers resuming their operations, the demand for EV batteries is expected to pick up the pace and drive the market growth."

About 66 per cent of EV battery growth will originate from Asia-Pacific countries, the report added.

"China and Japan are the key markets for electric vehicle batteries in APAC. Market growth in this region will be faster than the growth of the market in other regions," it said.