LG Energy Solution Scraps $8.7 Billion EV Battery Project in Indonesia: Strategic Retreat or Missed Opportunity?

The South Korean battery giant has officially withdrawn from its ambitious electric vehicle battery value chain project in Indonesia, signaling a major shift in its global expansion strategy. What does this mean for the EV supply chain and the future of battery manufacturing in Southeast Asia?

Market Headwinds Force Strategic Reversal

The withdrawal reflects growing caution in the EV battery sector amid evolving market dynamics and challenging investment conditions.

• LG Energy Solution officially announced on April 21, 2025, that it is abandoning its 12 trillion won (approximately $8.7 billion at current exchange rates) EV battery value chain project in Indonesia
• The project was originally part of the “Indonesia Grand Package” agreement formed with the Indonesian government in late 2020
• The decision comes amid stagnating electric vehicle demand globally and rapidly changing conditions in the battery market

Supply Chain Recalibration

The company is pivoting to focus on established ventures while maintaining a strategic presence in Indonesia.

• Despite the large-scale project cancellation, LG Energy Solution plans to explore various cooperation opportunities centered around HLI Green Power, its battery joint venture in Indonesia
• HLI Green Power, established in partnership with Hyundai Motor Group, has already completed construction of its first EV battery cell production plant in Indonesia
• This strategic shift indicates LG’s preference for targeted investments with established partners rather than massive standalone projects

Raw Material Challenges

Surging prices for battery materials have undermined the economic viability of the original project scope.

• The project withdrawal was reportedly influenced by external factors including sharp increases in battery raw material prices
• Indonesia holds approximately 22% of the world’s nickel reserves, which initially made it an attractive location for battery manufacturing
• However, processing these materials economically has proven more challenging than initially projected

Regional Impact

Indonesia’s ambitious plans to become a global EV battery hub face setbacks but remain active through other partnerships.

• LG Energy Solution has indicated it will maintain long-term cooperation with the Indonesian government despite this project withdrawal
• The decision represents a significant blow to Indonesia’s efforts to move up the EV supply chain from raw material supplier to battery manufacturer
• Other battery manufacturers including China’s CATL continue to invest in Indonesian battery production, suggesting the country remains competitive in the global landscape

This strategic retreat by LG Energy Solution reflects the increasingly cautious approach major battery manufacturers are taking in a market characterized by volatile demand and uncertain regulatory environments. Whether this represents a temporary pause or a fundamental reassessment of Indonesia’s role in the global battery supply chain will become clearer in the coming months.

Keywords

LG Energy Solution, Indonesia, EV battery, investment withdrawal, HLI Green Power

Hashtags

#LGEnergySolution #EVBattery #Indonesia #BatterySupplyChain #MarketConditions

한국어 요약

• LG에너지솔루션이 2025년 4월 21일 인도네시아에서 추진하던 12조 원(약 87억 달러) 규모의 전기차 배터리 밸류체인 프로젝트를 공식 철회
• 전기차 수요 정체와 배터리 시장의 급변하는 상황이 주요 철회 배경으로, 배터리 원재료 가격 급등 등 외부 요인도 영향
• LG에너지솔루션은 현대차 그룹과 공동 설립한 HLI 그린파워를 중심으로 인도네시아 내 사업은 지속할 계획
• 인도네시아의 배터리 제조 허브 야망에 타격이나, 중국 CATL 등 다른 업체들의 투자는 계속되는 상황