Hyundai Motor and LG Energy Solution said on Thursday that they have signed an agreement to build a joint battery factory in Indonesia.
The factory will have a capacity of 10GWh per year and start production in 2024.
The pair will spend US$1.1 billion in total on the venture, each owning half of the stakes of the subsidiary.
LG Energy Solution said it plans to manufacture NCMA (nickel, cobalt, manganese and aluminum) cathode batteries at the factory.
The company said the addition of aluminum to traditional NCM cathode will increase energy density and safety of the new batteries.
It will be located at the Karawang Regency, 65km southeast of the capital Jakarta.
The batteries produced their will be supplied to Hyundai Motor for its E-GMP platform.
Hyundai Motor currently manufactures Ioniq 5, Genesis GV60 and Kia EV6 using E-GMP.
The Indonesia government is expected to provide tax incentives to the factory, the pair said.
The new factory will also act as the base for the two South Korean companies to expand in the APAC market.
ASEAN countries levy up to 80% in customer tax for automobiles, the companies said. But for companies that localize over 40% of its component production, the country exempts the custom tax under AFTA rules, Hyundai Motor and LG Energy Solution said. Indonesia is a part of AFTA.
Last year, Hyundai Mobis also formed a joint venture with LG Energy Solution for battery packs called HL Green Power.
Hyundai Mobis owns a 51% stake in the venture while LG Energy Solution controls 49%.
With the addition of Indonesia, LG Energy Solution will now have factories in five countries __ including South Korea, the US, China and Poland.
The company currently has a battery production capacity of 120GWh per year but is aiming to expand this to 155GWh this year. It is aiming for 260GWh by 2023.