LG Chem and Hyundai Motor was in talks to form a joint venture that produces batteries for electric vehicles (EV), people familiar with the matter told TheElec on Friday.
LG Chem will gain a steady demand line for the venture while Hyundai will secure batteries for its E-GMP platform, they said.
Talks for the venture is all but done except for signing of a contract. The joint venture will strongly likely be located in Indonesia, the people said.
Indonesia has high nickel reserves and is advantageous in securing materials for anode materials used to make batteries. The government there is also active in wooing foreign direct investments for factories.
Hyundai Motor already has plans to make an automobile factory there with an annual output of 250,000 units. A joint venture that produces battery nearby can leverage this.
In the long-term, Indonesia could be a hub for LG Chem and Hyundai Motor to expand in the fast rising EV and e-bike markets of Southeast Asia.
The talks for the venture began last year. The city of Dangjin where Hyundai affiliate Hyundai Steel owns industrial land was once considered, the people said. The talks took long to finalize for the two companies to agree on shares as well as battery volume and price.
This won’t be the first joint venture between the two South Korea conglomerates.
LG Chem and Hyundai Mobis formed a EV battery pack maker, called HL Green Power, back in 2010. Hyundai owned a 51% stake while LG owned 49%.
Their latest joint venture will also have a similar share ratio, the people said.
The joint venture between General Motors and Geely also has a similar ratio.
Hyundai Motor Group executive vice chairman Chung Eui-son is planning to meet his counterpart, LG Group chairman Koo Kwang-mo, on June 22 at Ochang, where LG Chem has a factory.
“LG Chem initially planned to make a joint venture with Vingroup of Vietnam but ended up only making a joint venture in packs,” one of the people said. The recent announcement by the Indonesian government to offer support for companies accelerated talks between LG Chem and Hyundai, they added.
Hyundai will gain a steady supply of batteries for its E-GMP with the formation of the Indonesia factory by heaving both LG Chem and SK Innovation as supplies. Hyundai-brand cars will continue to get their batteries from LG, while Kia-brand will secure theirs from SK.
LG Chem can turn its battery lines at Nanjing, China and Ochang, South Korea for those in ESS instead of EV batteries.
LG Chem may separate its battery business as a separate company going forward for the strong demand for its batteries. A LG Chem spokesperson said the company was reviewing multiple options, without elaborating.