Jakarta. The Indonesian government has joined forces with a consortium led by South Korean multinational electronics company LG to fast-track the establishment of a factory for manufacturing electric vehicle (EV) battery cells and associated facilities, entailing a substantial investment of $9.8 billion.

This ambitious project also involves the Indonesia Battery Corporation (IBC), a consortium comprising four state-owned enterprises, with the goal of producing batteries for electric vehicles.

The initiative will commence with the construction of a battery cell factory in the West Java town of Karawang, projected to cost around $1.1 billion. Anticipated to be operational by April 2024, this facility is poised to generate the equivalent of 10 gigawatt-hours (GWh) of battery cells.

Subsequent stages will encompass the establishment of supplementary infrastructure and a smelter at a mining site managed by state-owned mining firm Aneka Tambang (Antam) in Halmahera, North Maluku. This smelter will supply the necessary materials for the battery cell factory.

Efforts to materialize the project, which becomes a key part of the government’s ambition to make Indonesia a regional EV industry hub, are intensifying after Investment Minister Bahlil Lahadalia met with LG Energy Solution’s Chief Executive Officer Young Soo Kwon on Thursday.

In an official statement, Bahlil lauded the timely agreement, particularly in light of the United States' implementation of the Inflation Reduction Act, which has disrupted the global EV battery supply chain. He highlighted that the project will enhance the value of Indonesian products and foster significant employment opportunities.

"The Investment Ministry is committed to facilitating the licensing process and LG's investment in Indonesia, ensuring the swift realization of this mutually beneficial project for both Indonesia and Korea," stated Bahlil.

Young Soo Kwon expressed hope that construction of the factory could commence within the current year, while expressing gratitude for the Indonesian government's receptiveness towards the project.

"LG has successfully addressed the most challenging issue in negotiations between the two consortiums regarding the shareholder composition in any joint venture across the entire supply chain," Young noted.