Indonesia Secures $15 Billion Investment From Automakers in EV and Battery Production Push

Indonesia: Indonesia has made a major commitment to electric vehicle and battery production, signing more than a dozen deals worth over $15 billion in just three years. Notable companies involved in these agreements include Hyundai Motor, LG Group, and Foxconn.

Indonesia is quickly positioning itself as an essential global supplier of Nickel, a metal essential to the production of electric vehicles (EVs). With the world's largest reserves of Nickel and a ban on exporting raw ore material, Indonesia has become increasingly attractive to EV manufacturers such as Hyundai Motor, LG Group and Foxconn. In a span of just three years, the country has secured $15 billion in battery and EV production investments.

Indonesia is making a push to become the go-to destination for electric vehicle and battery manufacturing. President Joko Widodo has actively courted Tesla Inc., the world's most valuable automaker, to lure CEO Elon Musk to manufacture his company's innovative products in the sprawling Southeast Asian archipelago.

"I'm very confident this industry will grow quickly, will grow very fast," the president, Jokowi stated.

Indonesia is sitting on a wealth of natural resources, with 21 million tonnes of Nickel reserves estimated by the U.S. Geological Survey. That's almost one-fourth of all the world's reserves.

The archipelago country has been reaping the benefits of these riches since January-November 2019, when it mined 1.4 million tonnes of ore—a clear lead compared to its closest competitor, the Philippines, which only mines 290,000 tonnes during the same period. In fact, Indonesia's output has more than doubled from 2018—that year producing 606,000 tonnes of the metal.

In 2020, President Jokowi of Indonesia banned the export of raw Nickel ore and imposed restrictions on the exportation of higher-value Nickel products. The move forced companies to process and manufacture onshore, which has driven Indonesia's exports of processed Nickel up to an impressive $30 billion by 2022.

The International Energy Agency estimates that Indonesia will account for half of the global production increase in Nickel between 2021-2025, due to the increasing demand for electric vehicles which can use up to 40 kg of Nickel per vehicle.

Tesla aims to sell 20 million electric vehicles by 2030, a 15-fold jump from the 1.3 million they sold in 2022. To fuel this growth, they need to build 7 or 8 more 'gigafactories' which produce electric car batteries on a large scale - one every 12 months or so.

Indonesia's goal of increasing Nickel exports to 200 times pre-export ban levels could be met if they successfully build an electric vehicle ecosystem. This is evidenced by Brazilian mining company Vale, who predicts a 44% jump in demand for Nickel by 2030, due to high demand for electric vehicle batteries.

According to President Jokowi, Indonesia is aiming to establish an integrated supply chain for electric vehicle batteries by 2027. The nation has also announced that it will ban exports of Copper ore and Bauxite in June, two materials commonly used in the production of electric vehicles. Additionally, Indonesia's Nickel export ban has been challenged at the World Trade Organization (WTO) by the European Union; the WTO ruled in favour of the EU, though Indonesia has since filed an appeal.

Indonesia's success in the Nickel industry has encouraged other countries to follow suit. The Philippines, for example, is looking into taxing exports of Nickel ore so miners are motivated to invest in processing.

President Jokowi has personally taken on a project to persuade Elon Musk to invest in Indonesia. He's held talks with the Tesla CEO twice and even offered Nickel mining concessions and tax breaks to attract investments. Jokowi confidently believes an agreement will be reached soon.

Tesla is considering several potential new manufacturing hubs, but no firm plans have been announced yet. South Korea, Canada and Mexico are all actively vying to attract the iconic carmaker.

Recently, Tesla has signed contracts for Nickel sourcing worth about $5 billion with companies in Indonesia, according to an official statement from the Indonesian government.

However, potential investors should consider the environmental effects of Nickel mining and Indonesia's reliance on coal-powered energy when making their decisions.

Despite the concerning environmental impacts and fears of waste dumping, global automakers are investing in or sourcing Nickel from Indonesia due to limited alternatives and an increasing demand for electric vehicles. Even buyers from more developed markets – who are known to be more conscious of sustainability credentials – will be forced to buy from Indonesia.