For years, Indonesia has missed a trick. It has the world’s biggest nickel reserves, at over 20%, and significant reserves of cobalt — two key ingredients in electric vehicle (EV) batteries — but while it has contributed to EV battery production through its exports of critical minerals, the country has seen little to no manufacturing activity.
Now with several big-ticket investments, such as a $1.1bn EV battery plant led by South Korean heavyweights Hyundai Motor Group and LG Energy Solutions, Indonesia’s investment minister Bahlil Lahadalia tells fDi why the country is betting on becoming an EV battery manufacturing hub and why Indonesia will not be readily influenced by Chinese investors or by any sole country.
Q: What are the Indonesian government’s ambitions for EV battery manufacturing?
A: Our dream is to better contribute to diversifying and distributing the global EV battery ecosystem as well as to ensure the accessibility of EV battery products to consumers worldwide. This is not just a mere ambition; it has turned into a reality because we have secured commitments from carmakers and chemicals companies, including LG, Volkswagen, CATL and BASF.
In terms of subjective and personal ambition, I think it is only fair that Indonesia – with huge resources of nickel, cobalt and manganese – can become a major critical hub for EV battery manufacturing. In this way, we house not only the resources, but also the manufacturing and the value-added parts of the value chain. EV batteries are therefore an important instrument for us to catch up to become a major industrialised player in the world.
Q: Coal is still predominantly used in Indonesian nickel processing. Does it concern you that foreign investors with environmental commitments might be put off by this?
A: Going forward, we will increasingly rely on green and renewable energy. This is something that we believe to be important because without renewables, we will lose our competitiveness in the international market. The existing power plants that rely on coal will be diverted into other parts of the nickel-processing ecosystem, such as stainless steel.
Then, EV battery manufacturing will increasingly rely on power coming from renewable energy. For example, the strategic industrial park in North Kalimantan, which will host battery manufacturing, will be powered by hydropower and in Batang* in Central Java, the energy will be increasingly generated from hydropower and solar photovoltaics.
Q: China remains one of Indonesia’s biggest investors. Are you concerned by its rivalry with the US and tensions over Taiwan?
A: China is the second biggest source of foreign investment into Indonesia, after Singapore, and Chinese investments in Indonesia are only slightly larger than other major sources of investments, including Japan, the US and South Korea.
In terms of the tension between China and Taiwan, I do recognise the possibility that there might be ramifications for Indonesia, which has pursued a neutral position on this issue.
One important thing I would like to underscore, however, is that Indonesia will not be dictated to by any one particular country. We remain open to investments coming from all countries. So, if there are more investments from Europe, UK or the US, I will fully support their realisation and development in Indonesia.
This article first appeared in the December 2022/January 2023 print edition of fDi Intelligence. View a digital edition of the magazine here.
*The article has been amended to reflect the name of the town in Central Java.