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Indonesia is trying to reduce Chinese investment in new nickel mining and smelting operations in order to qualify for U.S. tax incentives. Under the Biden administration’s Inflation-Reduction Act (IRA), large tax incentives will apply after 2025. However, it does not apply to batteries sourced from “foreign entities of concern,” such as companies in which Chinese capital holds more than 25% of the shares, or to EVs that use nickel or other key minerals. Indonesia’s nickel industry will be hit hard by these conditions. This is because the country has been the world’s largest producer of nickel for the past four years, thanks to a large influx of Chinese capital into its mining and smelting operations.
According to three people familiar with the matter, the Indonesian government and the nickel industry are working on new investment projects in which Chinese companies will have a smaller stake. It is possible that the nickel supplied through these deals will be eligible for tax benefits under the IRA. However, in order for the Indonesian nickel industry to receive tax benefits, it will also need to negotiate a trade agreement with the United States. The Indonesian side is proposing an agreement limited to critical minerals.
By Akihiro Komuro, Research Analyst, Far East and Southeast Asia
Akihiro Komuro
Hitachi Construction Machinery said it is demonstrating a rechargeable all-electric dump truck at a mine in Zambia. It’s the world’s first demonstration of an ultra-large machine with a payload capacity of 200 tons.
Operating conditions and battery life will be verified over a one-year period. The original plan was to have the system in operation by the end of 2024, but the company now plans to launch it in 2025 or later.
The overhead wires will be installed along the mine’s route and the battery will be recharged as it travels along the route. This system allows for more efficient operation than recharging at stops. The batteries mounted on the vehicle body will also be lighter, increasing the payload capacity of the dump truck.
South Korean battery giants LG Energy Solutions and Hyundai Motor have opened their first battery plant in Indonesia. The plant will produce batteries for electric vehicles to be sold locally and in neighboring countries. Indonesian President Joko made the announcement at a ceremony held July 3 in the Karawang region near the capital, Jakarta, to mark the opening of the new plant.
The investment is $1.2 billion, split 50-50 between LG Energy and Hyundai Motor. The annual battery production capacity is 10 GWh, which is equivalent to 150,000 electric vehicles. The plan is to invest an additional $2 billion in the second phase to increase the capacity to 20 GWh.
The company will produce lithium-ion batteries using a cathode material called NCMA. The high nickel content increases battery performance and range. The new plant will be LG Energy’s fifth production site in Southeast Asia, following those in South Korea, Poland, China and the U.S.
LG Energy has already supplied NCMA to Tesla, among others. In addition to Indonesia, the new plant will also serve as an export base for batteries used in electric vehicles sold by Hyundai Motor in neighboring countries in Southeast Asia, India, South Korea and elsewhere.
PSR Analysis: South Korea, which is positioning its battery industry as a key national industry, is moving very fast. The fact that it was able to get its battery plant up and running before its competitors may give it an advantage in its future business development in the region. But China’s CATL, the world’s largest EV battery manufacturer, plans to build new factories for batteries, battery materials and battery recycling in Indonesia in cooperation with local companies. The investment is about $6 billion. The news of the new plant in Indonesia is good news for South Korea’s automotive industry, but whether South Korea will be able to maintain a stable supply of EV battery materials in the future remains to be seen yet. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
Honda said it plans to integrate its two automotive manufacturing plants in Thailand by 2025. The move will cut annual production capacity in Thailand by 50% to 270,000 units.
Production at the Ayutthaya plant will be discontinued and consolidated at the Prachinburi plant in central Thailand. The Ayutthaya plant has an annual production capacity of 150,000 units. Honda’s total production capacity in Thailand is 270,000 units, but there was a surplus of 147,000 units in 2011. The company will improve the profitability of its four-wheel business by reducing fixed costs. The Ayutthaya plant will continue to be used as an auto parts plant.
Iseki announced the development of an unmanned tractor that operates without a pilot under the supervision of a human operator. With 123 horsepower, one of the largest in Japan, the tractor will support labor-saving agricultural work amid the trend toward large-scale farming. Priced from 21.9 million yen, the tractor will be marketed to large-scale farmers, mainly in Hokkaido.
The company’s human-supervised robotic tractor, which previously had a maximum power of 98 hp, has increased its power to 123 hp, thereby expanding the range of work and reducing the time required. It also reduces the time needed to train farmers who are unfamiliar with operating the tractor, allowing them to work more efficiently.
Suzuki says it will withdraw from four-wheel vehicle production in Thailand. Production at the local subsidiary will cease by the end of 2025, and vehicles made at the main plant in India will be exported to Thailand for sale. Thailand has long been a stronghold of Japanese automakers, but Chinese automakers have gone on the offensive with low-cost EVs, and with Subaru’s decision to pull out, the plight of Japanese automakers is becoming more apparent.
Suzuki Motor Thailand (SMT), a local subsidiary, will cease production by the end of 2025, and SMT will focus on sales and customer service in Thailand. Thai Suzuki Motor, which produces motorcycles and outboard engines, will continue operations.
Komatsu has announced the development of a hydrogen-powered generator that will be used to power an electric mini excavator. It can be transported to the job site, allowing electric construction equipment to be used in places where there is no electric power infrastructure. The system will be tested at customer sites by September 2024.
The generator was developed in cooperation with DENYO. The generator is 3.1 meters long, 1.1 meters wide and 1.7 meters high. It generates electricity by mixing up to 40% hydrogen with light oil. HVO fuel (hydrogenated vegetable oil), a type of biofuel made from waste cooking oil, can also be used.
Komatsu has developed hydrogen-blended combustion power generators for use in on-site power generation at factories and other facilities. The company sells seven types of electric construction equipment but is unable to supply power to sites where there are no power distribution networks, so it has been working to commercialize an electric power supply infrastructure.
Korea’s Hyundai Motor Group is going on the offensive with hybrid vehicles. Its subsidiary Kia plans to introduce HV models in nine of its main models, doubling its current sales volume to 800,000 units by 2028. Kia will temporarily review its investment focus on EVs, where competition is heating up globally, to flexibly respond to market trends.
In early April, Kia’s CEO showed signs of impatience at a business strategy meeting in Seoul, admitting that the EV market is slowing down and pushing back the goal of surpassing sales of 1 million EV units by 2026 to 2027.
At the same time, he announced the expansion of HVs: by 2028, he will introduce HVs in nine major models worldwide, increasing HV sales from 372,000 units (12% of the total) in 2024 to 800,000 units (19%).
Rankings of new vehicle sales in Southeast Asia are shifting, with Malaysia overtaking Thailand to take second place in 2023. The Philippines overtook Vietnam to take fourth place. EV sales continue to grow across the region, particularly in Thailand.
New vehicle sales in six major Southeast Asian countries, including Indonesia and Thailand, totaled 3.34 million units in 2023, down 2% from the previous year. This was the first decline in three years. Rising interest rates weighed on the market. In Southeast Asia, customers with low equity often buy cars with car loans, which was affected by higher lending rates and stricter underwriting.
Despite the headwinds, sales increased in Malaysia and the Philippines. Sales in Malaysia rose 11% to 790,000 units, a record high, and the country became the second largest market in the region for the first time. The introduction of sales tax exemptions for domestically produced vehicles as part of an economic stimulus package provided a boost.
On March 28, Kubota unveiled the first prototype of a fuel cell-powered tractor. Although no release date has been set, the company will consider installing fuel cells in unmanned, automated tractors. Kubota is also developing battery-powered agricultural equipment, but the company believes that hydrogen-powered fuel cells will be effective for medium-large sized agricultural equipment.
Kubota is rushing to commercialize fuel cells because it believes demand will grow in developed countries such as Japan, Europe and the United States as a result of the trend toward decarbonization. The prototype machine has about 60 horsepower and has three hydrogen tanks installed above the cabin, which are used in Toyota’s Mirai fuel cell car. It generates electricity by reacting hydrogen with oxygen to power the engine. In the experiment, a tractor was equipped with a plowing unit to till the soil.
