LG Energy confirms withdrawal from Indonesia EV battery project

South Korea’s LG Energy Solution (LGES) has withdrawn from a 142 trillion rupiah (US$8.45 billion) EV battery project in Indonesia.

The project, known as the Indonesia Grand Package, began in late 2020 as a collaboration between LGES and the Indonesian government.

LGES cited market conditions and the investment environment as reasons for its decision.

Despite this, LGES intends to explore collaboration opportunities with the Indonesian government through its joint venture, HLI Green Power. The plant has an annual capacity of 10 gigawatt hours and plans for further expansion.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Indonesia’s critical position in global EV supply chains faces a major test

Despite LG Energy Solution’s withdrawal from the $8.45 billion project, Indonesia remains strategically positioned in global EV supply chains due to its vast nickel resources.

The country holds approximately 22 million tons of nickel reserves and accounts for 55% of global nickel mine production, making it essential for battery manufacturers worldwide 1.

This withdrawal occurs even as Indonesia actively pursues its ambitious goal to rank among the top three global producers of EV batteries by 2027, targeting a production capacity of 140 GWh annually 1.

Indonesia’s 2014 ban on unprocessed nickel ore exports was specifically designed to encourage domestic processing and attract the kind of investment that LGES is now withdrawing, highlighting the challenges in implementing resource nationalism policies.

Despite this setback, Indonesia continues to attract significant investments from other players, including a $1.3 billion factory from BYD and a $1.2 billion assembly plant from VinFast 1.

2️⃣ EV market cooling triggers strategic reassessment by major manufacturers

LG Energy Solution’s withdrawal reflects broader industry trends as EV manufacturers face what industry analysts call the “EV chasm,” a significant slowdown in global EV demand growth 2.

The decision follows extensive feasibility studies by LGES and its partners LG Chem and LX International, with the company explicitly citing “market conditions and investment environment” as key factors in their withdrawal 3.

This strategic retreat parallels similar moves across the industry where manufacturers are reassessing ambitious expansion plans in response to fluctuating demand and market dynamics 2.