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Indonesia on its way to become a global EV hub

Indonesia banking on EV
Indonesia banking on EV

Indonesia is strategically positioning itself in the electronic vehicle (EV) market. The Southeast Asian country plans to take advantage of its large reserves of copper, bauxite, and nickel ore to become a hub for lithium-ion battery and EV production.

Speaking at the Investor Daily Summit in mid-July, Industry Minister Agus Gumiwang Kartasasmita pointed out, “Indonesia’s key advantage in the EV industry is a nickel-based lithium-ion battery because we have the world’s biggest nickel reserves.

“The battery is the most valuable component inside an EV, accounting for 35% of production costs,” the minister added. 

Indonesia is currently the world’s top nickel producer, comprising up to 30% of the worldwide production, and its nickel reserves are forecast to last for over 30 years.  

For the past 20 years, the demand for lithium-ion batteries has surged due to their use in laptops and mobile devices. This demand is set to increase further as the demand for EVs and hybrid cars also picks up its pace.  

The International Energy Agency expects about 70 million EVs to be on the roads globally by 2050. 

Indonesian government’s EV plans

This EV trend is being embraced by the Indonesian government, which plans to transform the country into a fully integrated EV battery hub that covers mining, processing, and recycling batteries. 

In 2019, President Joko Widodo signed a decree that lays out government support for establishing an EV industry in the country. However, Widodo warned that building such an industry could take longer than one or two years because of the need to create a new market. 

Last month, the Indonesian government introduced an EV roadmap, which details the different incentives that will be offered to attract more investment in the country’s EV sector.  

This Roadmap states that EV sales will enjoy an exemption from luxury tax and import duties while EV consumers will receive low-interest installments. The industry minister added that EV owners would be able to upgraded home electricity capacity at a discount. 

An official said the country aims to produce 600,000 electric cars and 2.5 million electric motorcycles by 2030. 

In relation to this initiative, the government has also declared nickel mining and battery development a key priority in recent reforms to attract more investment. 

According to the Mining Advocacy Network, the Indonesian government has issued 328 nickel mining business permits for exploration and 280 permits for production for this year alone. This indicates an increase in demand for the metal. 

Businesses investing in Indonesia EV

The first company to announce its EV plans in Indonesia was South Korean automaker Hyundai, which already has a $1.5 bn facility in Cikarang, West Java.  

The Cikarang factory is currently developing two models of the automaker’s internal combustion engine (ICE) cars. Lee Kang Hyun, chief operating officer of Hyundai Motor Asia Pacific, said the two ICE models and an EV model will be launched around March 2022. 

The company says the factory has a production capacity of 200,000 units annually. Lee forecasts global EV sales to surge from 2 million units in 2020 to 30 million by 2030. 

Additionally, Hyundai Motor Group formed a joint venture (JV) with LG Energy Solution to construct a $1.1 bn EV battery plant in the country.  

In a statement, Hyundai said the 50-50 JV facility would be situated in the Karawang regency of West Java. The groundbreaking will be held this year, and production is expected to begin in 2024. The factory will have an annual capacity for 10 gigawatt-hours (GWh) of battery cells, according to Hyundai. 

Meanwhile, Indonesia Battery Corp (IBC) and a consortium led by LG Group will be investing $1.2 bn to build another EV battery plant that’s slated to begin production in Bekasi, West Java by 2023. The IBC-LG project is expected to reach a total investment of $9.8 bn and will employ 1,000 workers. 

In December 2020, the Indonesian government announced that China-based Contemporary Amperex Technology (CATL) plans to build a $5 bn lithium battery factory in the country to increase its capacity as demand for EV continues to grow. It is scheduled to start production by 2024.

A deal between Tesla supplier CATL and Indonesian state miner PT Aneka Tambang was also formed to make sure that 60% of its mined nickel will be used to produce batteries.