South Korea’s leading automaker Hyundai Motor Group and battery producer LG Energy Solution are joining forces to establish a $1.1 billion electric vehicle battery plant in Indonesia, the companies said Thursday.

The two companies signed a memorandum of understanding with the Indonesian government for the plant, which would produce 10 gigawatt-hours worth of NCMA (nickel, cobalt, manganese, aluminum) lithium-ion battery cells annually, enough for 150,000 electric vehicles, the firms said.

For the project, Hyundai Motor Group and LG Energy will establish a 50:50 joint venture. Indonesia will provide tax breaks and other incentives to support the stable operation of the envisioned plant, the firms said.

The factory, to be built on a 330,000-square-meter plot of land in Karawang, near the capital of the Southeast Asian country, is to break ground in the fourth quarter of this year. Construction is slated to be completed in the first half of 2023 and the factory will begin mass-producing the battery cells in the first half of the following year.

The battery cells produced there will be used in Hyundai Motor and Kia models built upon Hyundai’s Electric-Global Modular Platform platform, Hyundai Motor said.

A signing ceremony was held Wednesday at LG’s headquarters in Seoul, attended by Hyundai Mobis President and Chief Executive Officer Cho Sung-hwan, LG Energy Solution President and CEO Kim Jong-hyun and others. Indonesian Investment Minister Bahlil Lahadalia and Indonesia Battery Corp. President Director Toto Nugroho also joined virtually. Hyundai Mobis is the auto parts business unit of Hyundai Motor Group.

As for the reasons to choose Karawang for the production base, the two companies said the city provides optimal conditions. Located close to Jakarta, it boasts well-established transportation networks, including airports and seaports, and there are also other large-scale industrial complexes in the area.

Hyundai said their cooperation with LG Energy Solution, a prominent battery maker specializing in advanced lithium-ion batteries for electric vehicles, will support Hyundai Mobis to secure stable supply of the auto parts as global demand rises.

The automotive group said it aims to expand its battery electric vehicle lineup to more than 23 models and sell 1 million electric vehicles to the global market annually from 2025.

By Jo He-rim (herim@heraldcorp.com)