Tesla agrees to build battery and EV factory in Indonesia

Indonesia leveraging nickel to attract Tesla’s investment in battery and EV plant
Tesla is said have agreed to set up a batter and EV plant in Indonesia

Indonesia’s Investment Minister Bahlil Lahadalia announced that Tesla agreed to set up a battery and EV plant in Indonesia. The agreement comes after Elon Musk’s meeting with President Joko “Jokowi” Widodo last weekend. Indonesia banned raw nickel exports in January 2020. With this, the country aims to attract investments in local manufacturing.

Tesla agrees to build battery and EV factory in Indonesia
Image credits- Electrek

Bahlil said, “The team is negotiating, but rest assured the President has a special move to woo Elon Musk. I personally have faith [in it]. God willing, Elon Musk’s [investment] will come to our country.” So far it is known that Tesla is eyeing an industrial complex in Central Java Province. The new factory could potentially be set up in the location. However, the deal has not been signed yet, and Tesla is hoping to have a solid investment plan by the end of 2022.

As stated by Bahlil, “God willing, Tesla will enter Indonesia this year.  But I can’t announce the month yet. Let’s wait because we haven’t signed an agreement yet. How much investment is still being kept secret, still waiting. But this is good stuff, big stuff.” In the past few weeks, Elon Musk is known to have met with various Indonesian officials. His most recent visit was meeting President Jokowi at SpaceX in Texas. They talked about technology and innovation as the President visited SpaceX.

Leveraging nickel

The Center for Strategic & International Studies (CSIS) published a commentary in December 2021 that touched on Indonesia’s nickel reserves. According to the CSIS, Indonesia holds the world’s largest nickel reserves. The country produces 1 million metric tons per annum, accounting for 37% of the world’s nickel production.

Indonesia leverages its nickel reserves to attract investment in the battery supply chain. The Indonesian government banned the export of raw nickel in January 2020. Earlier this year, the government claimed that the raw nickel export ban has positively impacted Indonesia as it resulted in increased mining investments and exports of nickel-derived products. Stated, “Indonesia’s nickel strategy must be seen against the backdrop of the mineral’s key role in the energy transition.” Later added, “Indonesia is aware of the economic opportunities this development provides, and increasingly focuses on attracting investments in production capacity along the EV supply chain.”

The country’s first EV battery cell plant is also being set up by South Korea’s LG Energy Solution and Hyundai Motor Group. Indonesia appears to have taken its next step to focus on batteries being made domestically. Half of global nickel production growth is expected to be in Indonesia between 2021-2025.