The Indonesian government announced on Feb. 5 that it had received an investment proposal from Tesla. The country is the world’s largest producer of nickel, which is essential for the production of batteries for EVs. In order to promote the EV and battery related industries, Indonesia had invited Tesla to invest in the country.
Details of the talks between Indonesia and Tesla cannot be disclosed due to confidentiality agreements, but it is said that they have mainly discussed battery and energy storage solutions. The Indonesian vice-minister said, “If Tesla only wants to buy raw materials, we are not interested. The proposal is more than the procurement of raw materials and extends to energy storage systems such as MegaPack, PowerPack and Powerwall,” he said.
Indonesia halted nickel exports in 2020. It aims to build an integrated nickel supply chain system, from mining to processing, to meet the demand for EVs. Tesla pointed out in 2020 that the cost of batteries remains a hurdle to expanding its business and revealed that it is looking for stable sources of nickel around the world.
Source: Reuters Japan
PSR Analysis: Talks between Indonesia and Tesla are still in the early stages of discussion, and details are still undecided. However, Indonesia, the world’s largest producer of nickel, the raw material for EV batteries, announced a policy last year to ban exports. Since then, many companies, not just Tesla, have begun to explore opportunities to set up production bases in Indonesia. South Korea’s LG Energy Solution plans to start building an EV battery plant in the first half of 2021.
China’s CATL is also planning a similar project in cooperation with an Indonesian state-owned company. Hyundai Motor Company has also announced an investment of US$1.55b.
According to a Reuters report, Indonesia is increasing its nickel production capacity to 550,000 tons, up 46% from a year earlier. Nickel and cobalt are the main raw materials for batteries, and Indonesia is the world’s No. 1 producer of nickel and the world’s No. 2 exporter. Congo supplies 60% of the world’s cobalt, but due to political instability, mining in Indonesia is expected to grow.
The drive by automotive companies to secure the resource will heat up further, which will further increase Indonesia’s international importance and contribute to the country’s development. Indonesia has a large population and strong domestic demand for automobiles. FDI in Southeast Asia as a whole has been declining due to the Corona disaster, but it will intensify in the future with or without the COVID-19 issue, especially for EV and battery production. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research.
