The goal is to attract Chinese mining companies to set up smelters for nickel ore within Indonesia
Indonesia is on a mission to position itself as the global hub in the electric vehicle (EV) ecosystem. President Joko Widodo (also known as Jokowi) is pushing hard as he courts Chinese investors to back his vision. Central to this is the establishment of a comprehensive EV supply chain, driven by Indonesia’s role as the world’s largest producer of nickel (a vital component for lithium-ion batteries used in EVs) and China‘s leading position in EV battery production.
In a recent meeting held in Chengdu, President Jokowi, along with the Indonesian Chamber of Commerce, engaged with Chinese CEOs to discuss the creation of a downstream nickel industry. The goal is to attract Chinese mining companies to set up smelters for nickel ore within Indonesia. It’s a smart move since Indonesia is sitting on massive nickel reserves, around 21 million tons, or about 22% of known global reserves.
Indonesia’s proactive EV policy
Jokowi’s administration has been quite proactive in fostering a conducive environment for EV production. Their efforts include incorporating EV production into the National Masterplan for Industry 2015-35 and explicitly specifying EV infrastructure development in the National Medium-Term Plan 2020-24. The president envisions Indonesia manufacturing more than 2.4 million electric vehicles by 2035, including both cars and motorbikes.
These grand plans come with a hefty set of incentives to lure investors. The government is offering a set of fiscal benefits for EV-related firms. These perks include multi-year tax holidays and import duty exemptions. Additionally, Jakarta’s officials and local governments are negotiating incentives related to land and infrastructure. This push for Chinese investment is tied to the country’s moratorium on mineral ore exports since 2020. The ban dictates that all raw nickel mined in Indonesia must undergo domestic processing for the creation of local jobs and higher value-added exports.
Despite the massive nickel reserves and investor confidence, some experts still believe that Indonesia is not yet fully equipped to establish a comprehensive EV supply chain. It’s essential that the government ensures technology transfer from China before nickel reserves run dry, which experts predict could happen in less than two decades. In this, the Tsingshan Group plays a significant role, as it operates many of the largest nickel mines and smelters in Indonesia.
Diversification is also on the agenda
In an effort to diversify its supply chain and reduce dependence on specific minerals, the country is also exploring alternatives to traditional nickel and cobalt-based batteries. One possible alternative is lithium iron phosphate (LFP) batteries, which eliminate the need for these rare minerals. China, a leader in battery technology, is spearheading the development of LFP batteries, which could change the geopolitics of battery supply chains and alleviate security concerns regarding cobalt and nickel.
The government’s pro-EV policies have attracted quite a bit of investment, positioning the country as a potential supply chain hub for EVs. Major Asian automakers, such as Toyota and Hyundai, have made large investments in expanding EV production sites in Indonesia. The country has set a target to make 600,000 EVs by 2030.
While the country faces competition from established regional players like Thailand, its growth in the EV sector could also have positive knock-on effects on neighbouring countries. Through its control over key materials, Indonesia has the potential to attract more investment and accelerate the adoption of electric vehicles in the ASEAN region. As the world realises the urgency of addressing climate change, Indonesia’s EV ambitions and global initiatives mark a major step towards a more sustainable and clean future for the world’s most populated continent.