Tesla Nears Setting-up Electric Vehicle & Battery Factory in Indonesia

Leading EV seller Tesla is close to inking a pact that will allow the US-based company to set up an electric vehicle factory in Indonesia. The facility may come up in Central Java’s Industrial complex and it may also host manufacturing of EV batteries. As per reports, the construction could start by the end of this year.

This was confirmed by the Investment Minister of Indonesia, Bahlil Lahadalia while participating in a discussion in Jakarta at Road to G20: Investment Forum and the theme was ‘Encouraging Expedition of Sustainable and Inclusive Investment.’ Lahadalia said during a talk on electric vehicle and battery production, “God willing, Tesla will enter Indonesia this year.”

The minister went on to say, “But I can’t announce the month yet. Let’s wait, because we haven’t signed an agreement yet. How much investment is still being kept secret, still waiting. But this is good stuff, big stuff.”

If the manufacturing facility of Tesla comes up in Indonesia, It will be the company’s third EV factory outside the US. Tesla is expected to cater to the South-East Asian and Pacific Region markets including Australia. At present, Model 3 of Tesla reaches Australia from Shanghai and presently the company can’t take fresh orders until 2023.

Why Tesla Has an Eye on Indonesia?

Market analysts say that Tesla is eying Indonesia for its next manufacturing destination because the country has over 21 million tonnes of nickel reserves which is more than that of Australia. Nickel is employed in the manufacturing of higher energy density batteries for EVs. OEMs can  use it to make smaller batteries or enhance the driving range of EVs.

In 2020, Elon Musk requested the industry to raise nickel production by saying, “Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way.” Immediately after that, Indonesian president Joko Widodo met Musk at the headquarters of SpaceX. There the Tesla owner had hinted that a big decision may be in the making when he said, “We’re going to look closely from a Tesla and Spacex standpoint to try to do some partnerships in Indonesia.” Tesla began its business with Nickel based batteries which is costlier than Lithium based batteries but it offers longer drive range and greater battery reliability.

Tesla has the highest share in the global electric vehicle industry. In 2021, it sold over 936,000 EVs which would come to over 14% of all the EVs sold worldwide. According to experts, it emerged as a pioneer in EV designs, production and sales.

A tesla entry into India has been widely anticipated, but deferred each time, primarily because of the mismatch between Tesla expectations on incentives and what the Indian government can offer.