Armed with the world's largest reserves of nickel and a ban on the export of nickel ore, Indonesia is making itself indispensable for the electric vehicle industry, which uses the metal extensively.
In three years, Indonesia has signed more than a dozen deals worth more than $15bn (roughly R261,957,750,000) for battery and electric vehicle production in the country with manufacturers including Hyundai, LG and Foxconn.
Next up is the mammoth Tesla, the world's most valuable carmaker. President Joko Widodo has pulled out all the stops to convince CEO Elon Musk to manufacture electric vehicles or batteries in the sprawling Southeast Asian archipelago.
"I'm very confident this industry will grow quickly, will grow very fast," the president, popularly known as Jokowi, said in an interview last week.
Indonesia has 21-million tonnes in proven reserves with nickel content, according to the US Geological Survey. That is nearly a quarter of the world's reserves.
The country mined 1.4-million tonnes of nickel from January to November last year, according to the International Nickel Study Group. That's far ahead of the second-biggest producer, the Philippines, which mined 290,000-onnes in the same period, and more than double Indonesia's output of 606,000 tonnes in 2018.
Jokowi banned exports of nickel ore in 2020, but allowed export of higher value nickel products, forcing companies to process and manufacture onshore.
Indonesia's exports of processed nickel then swelled to more than $30bn (roughly R523,939,500,000) in 2022 from about $1bn (roughly R17,464,650,000) in 2015.
Indonesia is expected to account for half the global production increase in nickel between 2021 and 2025, according to the International Energy Agency, as demand for electric vehicles surges. Each vehicle uses up to 40kg of nickel.
"The Indonesian government is building a value chain for servicing electric vehicle factories," said Victor Chin, principal consultant at metal consultancy firm CRU.
"It only makes sense for Tesla to consider Indonesia, both for a gigafactory and also for car manufacturing," he said.
Musk's goal is to sell 20-million electric vehicles in 2030, more than a 15-fold increase over the 1.3-million vehicles Tesla sold in 2022. For that, it would need to build seven or eight more gigafactories, the facilities that produce electric car batteries on a large scale, at an average of one every 12 months or so.
Indonesia has similarly ambitious goals. Jokowi said in the interview nickel exports can grow 200 times from pre-export ban levels of around $1bn (roughly R17,464,650,000) if the country successfully manages to build the electric vehicle ecosystem.
Brazilian mining company Vale has predicted a 44% jump in nickel demand by 2030 from 2022 levels due to high demand for batteries meant for electric vehicles.
Jokowi did not give a timeline for the exports growth but said Indonesia was aiming to establish an integrated supply chain for electric vehicle batteries by 2027.
In other moves, Indonesia will also ban exports of copper ore and bauxite in June, both used in electric vehicle production.
Personal stake
The nickel export ban has been challenged at the World Trade Organisation by the European Union. The WTO ruled in the EU's favour, but Indonesia has filed an appeal.
But Indonesia's success has already prompted other countries to emulate its steps, with the Philippines planning to tax exports of nickel ore to encourage miners to invest in processing.
The development of the industry in Indonesia is a pet project for Jokowi. He has taken it upon himself to convince Musk to invest in Indonesia, holding talks with the Tesla chief twice.
Last week, Jokowi said he has even offered Tesla a nickel mining concession and tax breaks to invest in the country, and he was confident a deal would be finalised.
While Tesla is looking for additional manufacturing hubs, it has not commented on firm plans in Indonesia. South Korea, Canada and Mexico have also been trying to entice the carmaker.
The company has signed nickel sourcing contracts worth about $5bn (roughly R87,323,250,000) from companies in Indonesia, a government official has said.
One area of concern for potential investors is the nickel mining industry's environmental impact and Indonesia's use of coal for power generation.
The process of making nickel suitable for EV batteries has a high carbon footprint and produces waste that environmentalists fear could be dumped in the ocean.
Still, global carmakers are investing or sourcing from Indonesia due to limited alternatives and booming demand, analysts said.
"There is not enough nickel capacity expansion outside Indonesia. Indonesian nickel production has grown its share from less than 20% to nearly 50% in last four years," said ANZ's Soni Kumari.
Even buyers from the developed markets who are more conscious of sustainability credentials will be forced to buy from Indonesia, Kumari said.
"As battery-grade nickel demand continues to grow, battery and car companies cannot ignore (criticism) that 'Indonesian nickel is not green enough' when most of the future growth is going to come from Indonesia," she said.
Like Musk, nickel-rich Indonesia has high EV ambitions
Image: Maja Hitij/Getty Images
Armed with the world's largest reserves of nickel and a ban on the export of nickel ore, Indonesia is making itself indispensable for the electric vehicle industry, which uses the metal extensively.
In three years, Indonesia has signed more than a dozen deals worth more than $15bn (roughly R261,957,750,000) for battery and electric vehicle production in the country with manufacturers including Hyundai, LG and Foxconn.
Next up is the mammoth Tesla, the world's most valuable carmaker. President Joko Widodo has pulled out all the stops to convince CEO Elon Musk to manufacture electric vehicles or batteries in the sprawling Southeast Asian archipelago.
"I'm very confident this industry will grow quickly, will grow very fast," the president, popularly known as Jokowi, said in an interview last week.
Indonesia has 21-million tonnes in proven reserves with nickel content, according to the US Geological Survey. That is nearly a quarter of the world's reserves.
The country mined 1.4-million tonnes of nickel from January to November last year, according to the International Nickel Study Group. That's far ahead of the second-biggest producer, the Philippines, which mined 290,000-onnes in the same period, and more than double Indonesia's output of 606,000 tonnes in 2018.
Jokowi banned exports of nickel ore in 2020, but allowed export of higher value nickel products, forcing companies to process and manufacture onshore.
Indonesia's exports of processed nickel then swelled to more than $30bn (roughly R523,939,500,000) in 2022 from about $1bn (roughly R17,464,650,000) in 2015.
Indonesia is expected to account for half the global production increase in nickel between 2021 and 2025, according to the International Energy Agency, as demand for electric vehicles surges. Each vehicle uses up to 40kg of nickel.
"The Indonesian government is building a value chain for servicing electric vehicle factories," said Victor Chin, principal consultant at metal consultancy firm CRU.
"It only makes sense for Tesla to consider Indonesia, both for a gigafactory and also for car manufacturing," he said.
Musk's goal is to sell 20-million electric vehicles in 2030, more than a 15-fold increase over the 1.3-million vehicles Tesla sold in 2022. For that, it would need to build seven or eight more gigafactories, the facilities that produce electric car batteries on a large scale, at an average of one every 12 months or so.
Indonesia has similarly ambitious goals. Jokowi said in the interview nickel exports can grow 200 times from pre-export ban levels of around $1bn (roughly R17,464,650,000) if the country successfully manages to build the electric vehicle ecosystem.
Brazilian mining company Vale has predicted a 44% jump in nickel demand by 2030 from 2022 levels due to high demand for batteries meant for electric vehicles.
Jokowi did not give a timeline for the exports growth but said Indonesia was aiming to establish an integrated supply chain for electric vehicle batteries by 2027.
In other moves, Indonesia will also ban exports of copper ore and bauxite in June, both used in electric vehicle production.
Personal stake
The nickel export ban has been challenged at the World Trade Organisation by the European Union. The WTO ruled in the EU's favour, but Indonesia has filed an appeal.
But Indonesia's success has already prompted other countries to emulate its steps, with the Philippines planning to tax exports of nickel ore to encourage miners to invest in processing.
The development of the industry in Indonesia is a pet project for Jokowi. He has taken it upon himself to convince Musk to invest in Indonesia, holding talks with the Tesla chief twice.
Last week, Jokowi said he has even offered Tesla a nickel mining concession and tax breaks to invest in the country, and he was confident a deal would be finalised.
While Tesla is looking for additional manufacturing hubs, it has not commented on firm plans in Indonesia. South Korea, Canada and Mexico have also been trying to entice the carmaker.
The company has signed nickel sourcing contracts worth about $5bn (roughly R87,323,250,000) from companies in Indonesia, a government official has said.
One area of concern for potential investors is the nickel mining industry's environmental impact and Indonesia's use of coal for power generation.
The process of making nickel suitable for EV batteries has a high carbon footprint and produces waste that environmentalists fear could be dumped in the ocean.
Still, global carmakers are investing or sourcing from Indonesia due to limited alternatives and booming demand, analysts said.
"There is not enough nickel capacity expansion outside Indonesia. Indonesian nickel production has grown its share from less than 20% to nearly 50% in last four years," said ANZ's Soni Kumari.
Even buyers from the developed markets who are more conscious of sustainability credentials will be forced to buy from Indonesia, Kumari said.
"As battery-grade nickel demand continues to grow, battery and car companies cannot ignore (criticism) that 'Indonesian nickel is not green enough' when most of the future growth is going to come from Indonesia," she said.
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