Tesla to start talks on EV battery plants in Indonesia

Jakarta welcomes move by US green energy giant, especially regarding tech transfer

A Tesla model X airport taxi outside Jakarta's Soekarno-Hatta International Airport last December. The US electric car company plans to invest in factories in Indonesia to make electric vehicle lithium batteries and power generators. PHOTO: AGENCE FR
A Tesla model X airport taxi outside Jakarta's Soekarno-Hatta International Airport last December. The US electric car company plans to invest in factories in Indonesia to make electric vehicle lithium batteries and power generators. PHOTO: AGENCE FRANCE-PRESSE

US green energy giant Tesla will start discussions with the Indonesian authorities next week on its investment plans for plants in the country to make electric vehicle (EV) lithium batteries and power generators, after the local government on Thursday confirmed receiving a proposal letter from the carmaker.

This follows moves by two global EV battery giants - China's CATL and South Korea's LG Chem - which had earlier held advanced talks to invest billions of dollars in South-east Asia's largest economy. Indonesia also holds about a quarter of global nickel reserves, a key raw material to make EV batteries.

"Tesla's proposal is a bit different from that of CATL and LG Chem. The base technology that Tesla will use is different," Mr Septian Hario Seto, Indonesia's deputy minister in charge of mining and investment, told a virtual media briefing yesterday.

Technology transfer is a key consideration as Indonesia requires investors coming to the country to commit to this key area.

"We are excited to work with Tesla. Tesla's lithium battery technology is among the world's best. If we have investment from CATL, LG Chem - which also have a very good technology - plus Tesla, Indonesia will pick up a lot to learn," Mr Seto added.

Tesla will build an EV plant in India's Karnataka state, local media reported.

CATL, the world's largest producer of lithium-ion batteries, shipped 40.7 gigawatt hours (GWh) last year, followed by the second-largest maker Panasonic with 30.7GWh and LG Chem with 13.3GWh, according to Bloomberg.

Also, CATL recently secured a deal to supply battery packs to Tesla, which overtook Toyota in mid-2020 to become the world's most valuable carmaker. Panasonic was previously the long-time supplier of Tesla.

State-controlled gold and nickel miner Aneka Tambang will be the local partner of these giant companies, and will ensure continued supply of the raw material.

With Tesla, the talks will also cover a plant to make energy storage system (ESS), which involves a device that stores energy to supply homes or industries during peak times when energy demand far surpasses supply, said Mr Seto.

"It works the way a mobile phone's power bank works, but an ESS may supply power to homes and industries. Its size could be tens of megawatts or even a hundred megawatt," Mr Seto said.

Indonesia has been trying for some time to encourage the setting up of an end-to-end EV industry in the country. In 2015, it started the construction of a nickel industrial park on 2,000ha in Central Sulawesi province that has today become the world's largest, producing millions of tonnes of stainless steel slabs. Nickel is also used to make steel.

Mr Seto also said Indonesia is on track to have China's Tsingshan and US copper and gold miner Freeport work together to build a US$2.5 billion (S$3.3 billion) copper smelter by 2023 in North Maluku province's Weda Bay.

"Negotiations are under way. The target is to have this concluded by end-March," Mr Seto said, adding that about 92.5 per cent of the project cost would be covered by Tsingshan, and 7.5 per cent by Freeport, and that the project would be mutually beneficial to all parties.

Tsingshan will benefit as it could develop the downstream industries that produce copper derivatives that could in turn be used in electric vehicles, while Freeport will also gain as it is required by the existing law to build a smelter to continue its mining operations beyond 2023, said Mr Seto.

A version of this article appeared in the print edition of The Straits Times on February 06, 2021, with the headline 'Tesla to start talks on EV battery plants in Indonesia'. Subscribe