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LG Energy Solution’s Strategic Retreat from Indonesia: Navigating the EV Chasm

Philip CarterMonday, Apr 21, 2025 7:27 am ET

14min read

The electric vehicle (EV) revolution has long been framed as an inevitability, but its trajectory is proving far less linear than anticipated. South Korea’s LG Energy Solution, a dominant player in the global battery market, recently underscored this reality by withdrawing from its $8.45 billion EV battery manufacturing project in Indonesia—a decision that signals both the volatility of the EV sector and the strategic agility required to survive it.

The EV Chasm: A Catalyst for Retreat

LG Energy Solution cited “changing market conditions” as the primary reason for abandoning the project, now slated to be shelved until 2025. At the heart of this shift is the “EV chasm”—a period of stagnant demand growth following years of exponential expansion. Global EV sales grew by just 11% in 2024, a stark contrast to the 35% surge in 2023. This slowdown stems from a confluence of factors: inflation-driven consumer caution, uneven charging infrastructure rollouts, and regulatory uncertainty in key markets like the EU and China.

The financial toll is clear: battery manufacturers now face a 26% year-on-year decline in announced plant investments, with companies delaying expansions by 12–24 months to align with revised demand forecasts. LG’s move is emblematic of this recalibration.

Prioritizing Capital Efficiency Over Scale

LG’s withdrawal highlights a strategic pivot toward short-term returns and technological innovation rather than long-term, capital-intensive projects. The company emphasized that the Indonesia venture no longer aligned with its “strategic priorities” after feasibility reviews. Instead, capital will flow to facilities with immediate production potential, such as its joint venture HLI Green Power—a 10 gigawatt-hour (GWh) battery plant already operational in Indonesia.

This focus on liquidity and ROI is critical. reveals a 15% dip in its share price since Q2 2024, while CATL and Tesla have seen smaller declines (9% and 6%, respectively). Investors appear wary of overexposure to projects dependent on uncertain demand timelines.

Industry-Wide Reassessment and Geopolitical Shifts

LG’s decision reflects broader sector dynamics. Battery manufacturers are now prioritizing regional supply chain diversification and next-generation technologies like solid-state batteries to reduce reliance on critical minerals such as nickel and cobalt. Indonesia, despite its status as the world’s largest nickel producer (37% of global output), faces challenges in converting resource abundance into value.

The withdrawal leaves a vacuum in Indonesia’s EV ambitions. Analysts suggest the country may pivot toward partnerships with Chinese firms like CATL or EVE Energy, which continue aggressive expansion despite market headwinds. For instance, CATL’s investments in Indonesia rose 40% in 2024, signaling confidence in the country’s mineral reserves despite current demand lulls.

Conclusion: Adapting to the New EV Reality

LG Energy Solution’s retreat from Indonesia is not a defeat but a strategic acknowledgment of the EV sector’s evolving landscape. By halting a long-term project in favor of existing assets and cutting-edge R&D, the company positions itself to weather the “chasm” while competitors face overcapacity risks.

The data underscores this calculus:
- Global EV battery demand is projected to grow at a 19% CAGR through 2030, but unevenly—emerging markets like Indonesia may lag without infrastructure upgrades.
- Solid-state battery adoption, which LG is accelerating, could reduce mineral dependency by 30–40%, mitigating supply risks.
- The shelved Indonesia project’s $8.45 billion price tag would have required a 10-year payback period; current demand forecasts make this timeline untenable.

Investors should view LG’s move as a model for resilience: prioritize flexibility, focus on near-term profitability, and bet on technology that reshapes the game. For Indonesia, the lesson is starker—its mineral wealth alone cannot attract capital without complementary policies to stabilize demand and streamline supply chains. The EV era is here, but it demands precision, not just ambition.

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