South Korean firms are seeking incentives and regulatory support from Indonesia for nickel-based batteries as Seoul seeks to deepen cooperation on critical minerals and strengthen the two countries' electric vehicle supply chain.

The proposal was raised during a discussion with the South Korean Embassy last week, as nickel-based batteries face increasing competition from cheaper alternatives that do not use nickel. This could affect cooperation between South Korean manufacturers and Indonesia, the world's largest nickel producer.

"We are really looking to the Indonesian government to provide incentives and ease regulations on batteries using nickel," Uhm Taeho, counsellor and political section chief at the South Korean Embassy, told reporters on August 26th in Central Jakarta.

Uhm said Seoul had also raised the issue with the Indonesian government, following a critical minerals partnership formalised during President Prabowo Subianto's first state visit to South Korea from March 31st to April 1st. Critical minerals was one of the 10 memoranda of understanding (MOUs) witnessed by Prabowo and South Korean President Lee Jae Myung during their bilateral meeting in Seoul. The partnership covers trade and investment in key projects, environmental standards and mine rehabilitation.

The request comes as South Korea, home to several major EV battery manufacturers, seeks to maintain its position in the global EV market, which grew by 21% in 2025 alone, according to a local daily. Nickel-based batteries used by many South Korean manufacturers face increasing competition from lithium iron phosphate (LFP) batteries, which contain no nickel and are generally cheaper to produce.

Uhm said nickel-based batteries have recycling and environmental advantages but acknowledged that their higher cost presents a challenge for manufacturers.

"By their nature, the nickel batteries are easily recycled and more environmentally friendly, but they are a little bit more expensive," Uhm said. "So in order for Korean companies to do businesses here, we are really looking to the Indonesian government [for incentives] because it will be beneficial for Indonesia [as well]," he further added.

Uhm cited Hyundai Motor Group's investments in Indonesia as an example of potential benefits for both countries. The South Korean automaker opened its first Southeast Asian manufacturing plant in Cikarang, West Java, in 2022. The factory produces conventional and electric vehicles and has an annual production capacity of up to 250,000 vehicles. Hyundai has also expanded into battery manufacturing through a partnership with fellow South Korean company LG Energy Solution. The two companies established HLI Green Power, Indonesia's first EV battery-cell plant, which began operations in Karawang, West Java, in 2024.

The Indonesian government has previously signalled a preference for nickel-based batteries over LFP technology. Energy and Mineral Resources Minister Bahlil Lahadalia said in August that the government was considering incentives for EVs using nickel-manganese-cobalt (NMC) batteries.

"Going forward, we will move in towards that direction in which [NMC incentives] become part of the strategy," Bahlil said, as quoted by a local daily.

Bahlil further added that Indonesia was developing a nickel-based EV battery ecosystem and would orient the development of its EV industry around the critical mineral. "LFP is admittedly [useful] for shorter distances, but nickel remains more reliable for longer distances," the minister said.