Indonesia Launches First Lithium Iron Phosphate Factory Amid Ambitions to Become EV Hub
Indonesia has taken a significant step towards becoming an electric vehicle (EV) manufacturing hub with the inauguration of its first lithium iron phosphate (LFP) factory earlier this month. However, analysts caution that the country’s heavy reliance on Chinese investment could pose challenges in marketing the cathode material to Western markets.
Chinese companies, equipped with ample expertise from their home market, can fill gaps in Indonesia's budding EV ecosystem when it comes to LFP technology.
The new plant, operated by the Chinese-Indonesian consortium PT LBM Energi Baru Indonesia in the Kendal Industrial Park in Central Java, represents a $200 million investment. It is Indonesia's first facility for producing LFP, a key component for lithium-ion EV batteries.
Ian Satchwell, an adjunct professor at the University of Queensland, noted that while Indonesia lacks significant lithium reserves, the country could still develop an LFP manufacturing industry by importing lithium from countries such as Australia or through recycling used lithium-ion batteries. "LFP output may be absorbed domestically if Indonesia's battery and EV industries grow as hoped. The balance would likely go to China," Satchwell told The Jakarta Post.
According to an Australian government report published in September, battery production is expected to remain concentrated in China through 2024-2026 due to the growing market share of LFP and lithium manganese iron phosphate (LMFP) batteries, despite increasing production of lithium nickel manganese cobalt (NMC) batteries outside China. The report estimates that Chinese companies will use their expertise to boost LMFP battery production over this period, delivering similar performance to older lithium-nickel chemistries at a lower cost.
When asked about opportunities for attracting Western investors to Indonesia's LFP manufacturing sector, Satchwell pointed out that the country needs to diversify its investment sources. "The foreign entities of concern (FEOC) rule in the United States' Inflation Reduction Act (IRA) will rule out LFP batteries for tax concessions if there is too much Chinese investment in the manufacturing supply chain," he said, adding that Europe may adopt similar measures.
The LBM Energi Baru Indonesia consortium includes China’s Changzhou Liyuan New Energy Technology, a subsidiary of major Chinese LFP producer Lopal Tech, and the state-owned Indonesia Investment Authority (INA).
