Indonesia relies on electric cars because of nickel reserves
2023.02.06 02:32
Indonesia relies on electric cars because of nickel reserves
By Kristina Sobol
Budrigannews.com – Indonesia has the largest nickel reserves in the world and is prohibited from exporting nickel ore, making it indispensable to the electric vehicle industry, which heavily relies on the metal.
With manufacturers like Hyundai Motor, LG Group, and Foxconn, Indonesia has signed more than a dozen deals worth more than $15 billion for the production of battery and electric vehicles in the country.
The enormous Tesla (NASDAQ:) comes next. Inc., the most valuable automaker in the world. In an effort to persuade CEO Elon Musk to produce electric vehicles or batteries in the vast Southeast Asian archipelago, President Joko Widodo has gone to great lengths.
In an interview last week, the president, who is more commonly referred to as Jokowi, stated, “I’m very confident this industry will grow quickly, will grow very quickly.”
According to the U.S. Geological Survey, Indonesia has 21 million tonnes of nickel-containing proven reserves. That amounts to nearly 25% of the world’s reserves.
The International Nickel Study Group says that between January and November of last year, the nation mined 1.4 million tonnes of nickel. That’s a lot more than Indonesia’s 606,000 tonnes produced in 2018, which was more than twice as much as the Philippines, the second largest producer, which mined 290,000 tonnes during the same time period.
In 2020, Jokowi restricted the export of nickel ore, allowing the export of higher-value nickel products, necessitating onshore processing and manufacturing for businesses.
After that, Indonesia’s exports of processed nickel increased from approximately $1 billion in 2015 to over $30 billion in 2022.
The International Energy Agency predicts that Indonesia will contribute half of the global increase in nickel production between 2021 and 2025 due to rising demand for electric vehicles. Nickel is used in up to 40 kg by each vehicle.
Victor Chin, principal consultant at the metal consulting firm CRU, stated, “The Indonesian government is building a whole value chain for servicing electric vehicle factories.” [Citation needed]
He stated:
“So it only makes sense for Tesla to consider Indonesia, both for a gigafactory and also for the production of automobiles.”
Musk wants to sell 20 million electric cars by 2030, which is more than 15 times more than Tesla sold in 2022, when it sold 1.3 million cars. In order to accomplish this, it would need to construct seven or eight additional “gigafactories,” which are large-scale facilities that manufacture batteries for electric cars, on an annual basis.
Jokowi stated in the interview that Indonesia’s nickel exports could double from the $1 billion they were before the export ban if the country is successful in building the electric vehicle ecosystem. Due to the high demand for batteries intended for electric vehicles, the Brazilian mining company Vale has predicted a 44% increase in nickel demand by 2030 from 2022 levels.
Jokowi stated that Indonesia aimed to establish an integrated supply chain for batteries for electric vehicles by 2027, but he did not provide a timetable for the expansion of exports.
In addition, Indonesia will prohibit bauxite and ore exports in June, both of which are utilized in the production of electric vehicles.
The European Union has challenged the World Trade Organization’s ban on nickel exports. The EU won the case at the WTO, but Indonesia has appealed.
However, the Philippines plans to tax nickel ore exports to encourage miners to invest in processing, and Indonesia’s success has already prompted other nations to follow suit.
Jokowi has a vested interest in the expansion of Indonesia’s manufacturing sector. He has held two conversations with Tesla CEO Elon Musk in an effort to persuade him to invest in Indonesia.
Last week, Jokowi stated that he was confident a deal would be reached and that he had even offered Tesla a concession for nickel mining and tax breaks to invest in the country.
While Tesla is looking for additional manufacturing centers, the company hasn’t said anything about any plans it has for Indonesia. Mexico, Canada, and South Korea have also attempted to entice the automaker.
According to a government official, the company has signed nickel sourcing contracts worth approximately $5 billion with Indonesian businesses.
Potential investors may be concerned about the impact that the nickel mining industry has on the environment and Indonesia’s use of coal for power generation.
Environmentalists are concerned that waste from the process of making nickel suitable for EV batteries could end up in the ocean and leave a significant carbon footprint.
Nonetheless, analysts assert that limited alternatives and expanding demand have led global automakers to invest in or source from Indonesia.
Outside of Indonesia, there is insufficient capacity expansion for nickel. In the past four years, Indonesian nickel production has increased from less than 20% to nearly 50%, according to ANZ’s Soni Kumari.
According to Kumari, even buyers from developed markets who are more conscious of their sustainability credentials will be compelled to purchase from Indonesia.
She stated:
“As battery-grade nickel demand continues to grow, battery and auto companies cannot simply ignore (criticism) that “Indonesian nickel is not green enough” when the majority of future growth is going to come from Indonesia.”
