Indonesia’s Electric Vehicle Commodities
Indonesia’s Electric Vehicle Commodities

Indonesia has extensive plans to leverage its commodity deposits to develop a thriving electric vehicle industry within the country. The nation has a basket of valuable minerals which are being viewed with enthusiasm in light of the growing international demand for electric vehicles. Not only will this demand facilitate new industries within Indonesia, but it will also strengthen Indonesia’s existing commodities supply chains. As international markets for electric vehicles expand there are significant new opportunities to capitalise on within Indonesia’s mining sector.

“The lithium is two percent of the cell mass [in our batteries]. So it’s like salt in the salad; it’s a very small amount of the cell mass and a fairly small amount of the cost. But it sounds like it’s big because it’s called ‘lithium ion’, but really, our battery should be called ‘nickel graphite’, because it’s mostly nickel and graphite.” — Elon Musk

Technology mogul Elon Musk makes an important distinction. Electric vehicles rely on batteries which are produced from a number of different mineral components, of which lithium is just one. It is their basket of necessary commodities which gives Indonesia a significant advantage when it comes to the development of electric vehicle batteries. Very shortly this will become a thriving marketplace that will create new business opportunities.

Indonesia’s location along the “Ring of Fire” means it has over 100 volcanos stretching along a crescent encompassing thousands of islands. Ancient geological activity has given the nation an abundance of mineral deposits, along with some of the most productive mines in the world. It is these resources and the existing mining sector which Indonesia intends to leverage for the growth of their electric vehicle industry. Nickel, cobalt, lithium, graphite and copper are all found in Indonesia’s archipelago and represent the vital basket of commodities necessary to produce batteries for electric vehicles. The primary mineral necessary for electric vehicle batteries is nickel and Indonesia has the world’s largest reserves. The country’s Energy and Mineral Resources Ministry estimates that Indonesia currently has more than 50 million tons which could last over 30 years.

Three of Indonesia’s largest state-owned businesses are joining forces in the push towards developing the domestic electric vehicle battery industry. The national oil and gas company Pertamina, recently rebranded state mining holding company Mind Id and electricity giant PLN intend to found a state-owned battery holding company. This new entity will develop an end-to-end domestic supply chain for electric vehicle batteries. It is estimated that global demand for batteries will increase by 400% within the next seven years to 777 gigawatt-hours (GWh). Indonesia intends to produce between 8 and 10 GWh yearly as it ramps up supply over the next four years. Indonesia’s President Joko “Jokowi” Widodo has set a target of having 20% of cars be electric within the next five years.

To encourage foreign direct investment in this industry Indonesia recently passed a new Omnibus Law which intends to improve the investment landscape. The country has often been criticised for high levels of bureaucracy and in 2019 the World Bank ranked Indonesia number 73 out of 190 countries in their Ease of Doing Business Index. The new laws signal Indonesia’s desire to improve this ranking which the government intends to raise to 40 within the next four years.

After talks with Jokowi last week, Elon Musk has agreed to explore opportunities for both Tesla and SpaceX within Indonesia. Leveraging Indonesia’s nickel supplies for electric vehicle batteries holds synergies for both parties. Elon Musk provided insight into his perspective earlier this year when he tweeted:

“Nickel is the biggest challenge for high-volume, long-range batteries! Australia and Canada are doing pretty well. US nickel production is objectively very lame. Indonesia is great!”

Other global manufacturers also have ambitions to invest in Indonesia and its nickel reserves. One of the world’s largest car battery manufacturers, Contemporary Amperex Technology from China, has announced plans to construct a $5.1 billion battery plant in the country. Japan’s Toyota recently pledged $2 billion worth of investment towards developing 10 different types of electric vehicles within Indonesia. Toyota intends to transform the country into a global hub for electric vehicle exports within the next five years. Hyundai Motor of Korea has also committed $1.55 billion in investment towards an electric vehicle manufacturing plant in West Java, which will become operational in 2021.

These illustrious names combined with Indonesia’s mineral reserves guarantee the success of this new industry in Southeast Asia’s largest economy. All the necessary components are aligning — the political will, foreign investment and the necessary natural resources. As the industry grows there will be an abundance of new business opportunities to capitalise on within Indonesia’s commodity sector.
['Matthew Averay']
['Mining', 'Electric Vehicles', 'Indonesia', 'Technology', 'Elon Musk']