Facts behind LG and Tesla’s interest in building electric car battery factories in Indonesia

KOMPAS.com – Recently, the Government of Indonesia has signed a joint memorandum of understanding (MoU) LG Energy Solution to build factories battery electric car in Indonesia.

The agreed investment value is US $ 9.8 billion or around Rp. 137.5 trillion (Rp. 14,000 rupiah exchange rate). This factory will later integrate the entire process of making electric batteries from upstream to downstream.

“Starting from mines, smelters, precursors, cathodes, cars to recycling facilities will be built in Indonesia,” said Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia.

The plan is for the factories to be built in North Maluku and Central Java. The MoU also states that at least 70 percent of the nickel that will be used to produce electric car batteries must be processed in Indonesia.

Thus, Indonesia became the first country in the world to integrate the electric battery industry from mining to producing lithium electric car batteries.

Some time ago, President Joko Widodo also invited the CEO Tesla, Elon Musk, to invest in the country, particularly in the battery supply chain sector for electric vehicles.

The invitation reportedly received a positive response from the Tesla boss. He will even send his team to Indonesia in January 2021 to hold further talks on the plan.

In addition, a battery manufacturer China’s Contemporary Amperex Technology (CATL) has reportedly signed an agreement with state mining company PT Aneka Tambang (Antam).

CATL plans to invest US $ 5 billion, or the equivalent of Rp. 70.6 trillion, for the construction of a lithium ion battery factory in Indonesia.

In the agreement, CATL is stated to be obliged to ensure that 60 percent of nickel from within the country is processed into batteries in Indonesia.

“We don’t want them to take the nickel out and process it abroad,” said Luhut, quoted from the website Hindustan. For information, CATL will invest 5 billion US dollars and start battery production in 2024.

Also read: LG builds battery factory for electric cars in Indonesia

Abundant nickel suggestions

One of the reasons that make electric car manufacturers or battery manufacturers look to Indonesia to build their own factories is because Indonesia has abundant nickel reserves.

Indeed, it is no longer an open secret that Indonesia has abundant nickel reserves. This makes Indonesia appear to be one of the largest nickel producers and exporters in the world, controlling about 27 percent of the global market.

According to the Ministry of Energy and Mineral Resources (ESDM), throughout 2019, Indonesia became the largest nickel ore producer in the world with nickel production of 800,000 tons.
In 2019, Indonesia was also listed as the second largest nickel exporter for the steel industry in the European Union countries.

In addition, nickel is also one of the largest metals in the manufacture of electric batteries. Lithium-ion is like the heart of the electric car revolution. The content of the lithium-ion battery consists of anode, cathode and electrolyte. Nickel is the dominant metal component in the composition of electric batteries, especially the cathode.

Thus, nickel is a very strategic mineral commodity in the world market for Indonesia. Unfortunately, for decades, Indonesia has only exported raw nickel.

To suppress raw mineral exports and carry out downstreaming, the Indonesian government has banned nickel ore exports as of January 2020.

This ban on raw mineral exports refers to the Ministerial Regulation (Permen) ESDM number 11 of 2019 concerning the Second Amendment to the Minister of Energy and Mineral Resources Regulation Number 25 of 2018 concerning Mineral and Coal Mining Business.

Also read: When Indonesian Startups Become The Dream Of American Tech Companies

Positive for Indonesia

Indonesia’s step in limiting raw nickel exports is a good step to take.

First, because this encourages foreign companies to invest directly in Indonesia, as has been done by LG Energy Solution and CATL.

Second, by being obliged to process nickel ore in domestic smelters and refineries, Indonesia can get a much-fold advantage compared to shipping nickel ore which is still ‘ground’.

As stated in the MoU with LG Energy Solution and CATL, both are obliged to ensure that 70 percent and 60 percent of nickel ore used for battery production must be processed domestically, respectively.

“We don’t want them to take nickel out and process it abroad,” said the Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, quoted from the Hindustan website.

Third, if the electric battery factory has started operating, this will be a new job field for the Indonesian people.

Indonesia has recently been aggressively processing nickel for use in lithium batteries, as part of efforts to produce and export electric vehicle batteries. This effort was made so that Indonesia would become part of the global supply chain for the world’s automotive industry.

With abundant nickel reserves, Indonesia also has an ambition to become the largest lithium battery producer in the world.

Also read: Government Plans: Pertamina Becomes Electric Car Battery Manufacturer

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