Jakarta \u2014 Deputy for Investment Promotion at the Ministry of\nInvestment and Downstreaming\/BKPM, Nurul Ichwan, has revealed the\nreasons behind LG\u2019s withdrawal from an electric vehicle battery\ninvestment project in Indonesia. The project was valued at 11 trillion\nwon, or US$7.7 billion (Rp 129 trillion).<\/p>\n
Nurul explained that LG\u2019s withdrawal was prompted by the United\nStates Inflation Reduction Act (IRA), a policy that could potentially\nexclude Indonesian-processed nickel from the US market. The IRA aims to\naddress inflation and climate change through various incentives and\ninvestments, particularly in the clean energy and environmental sectors.\nThe legislation was signed into law in 2022 during the Joe Biden\nadministration, whilst the initial agreement between LG and Indonesia\nwas reached in 2020.<\/p>\n
\u201cWhen LG initially wanted to invest in Indonesia, Biden\u2019s IRA policy\ndid not yet exist. Their investment target in Indonesia was based on the\nfact that Indonesia is the world\u2019s leading nickel producer, and they\npossess some of the best battery product technology \u2014 so they planned to\ninvest here,\u201d he said during the detikcom Indonesia Investment Talk\nSeries in Jakarta on Wednesday (30 April 2025).<\/p>\n
Initially, LG planned to carry out downstreaming operations up to\nproducing precursors and cathodes, which were to be exported to the US\nto meet electric vehicle demand. However, the introduction of the IRA\nforced LG to recalculate, thereby affecting the realisation of its\ninvestment in Indonesia.<\/p>\n
\u201cBut then the IRA came out, providing incentives for car purchases\nand incentives for those investing within America,\u201d said Nurul.<\/p>\n
\u201cThis prompted a response from the company that if they were to\ninvest in Indonesia with the US as their target market, but then the US\nimposed restrictions on that, it would no longer make sense to invest at\nthe originally planned capacity in Indonesia,\u201d he added.<\/p>\n
Nurul assessed that LG\u2019s decision to withdraw from the project in\nIndonesia was purely based on rational calculation and had no connection\nto the domestic investment climate. He noted that had LG pressed ahead\nwith the investment in Indonesia, the company would have been unable to\nfulfil its target market in the US.<\/p>\n
\u201cHow could they maintain the same investment capacity in Indonesia\nwhilst simultaneously needing to invest in America \u2014 because without a\npresence there, they could not serve the American market? So they ended\nup investing US$4.3 billion there, funds that could originally have been\nused for investment in Indonesia,\u201d he concluded.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/lgs-withdrawal-from-indonesias-us-7-7-billion-ev-battery-project-driven-by-us-inflation-reduction-act-1771237130", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }