Minister: Tesla to Invest in Battery, Electric Car Plant in Central Java

Dandy Koswaraputra
2022.05.19
Jakarta
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Minister: Tesla to Invest in Battery, Electric Car Plant in Central Java Founder and CEO of Tesla Motors Elon Musk and Indonesian President Joko Widodo walk during their meeting at the SpaceX launch site in Boca Chica, Texas, May 14, 2022.
Courtesy of Laily Rachev/Indonesia’s Presidential Palace/Handout via Reuters

U.S. electric carmaker Tesla has agreed to invest in battery and electric vehicle manufacturing in Indonesia, the country’s investment minister said Thursday without giving details, but hinting that the project might begin this year.  

Jakarta has been trying to woo Tesla for a few years now as it seeks to take advantage of being the world’s largest producer of nickel, a critical element in electric vehicle (EV) batteries. Jakarta has also set a goal that by 2025, 20 percent of cars made in Indonesia will be electric vehicles.

Tesla agreed to build a battery and electric vehicle plant at an industrial complex in Central Java province, following stateside talks last weekend between President Joko “Jokowi” Widodo and Tesla chief Elon Musk, Investment Minister Bahlil Lahadalia said on Wednesday.

“God willing, Tesla will enter Indonesia this year,” Bahlil told a discussion in Jakarta.

“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,” he said.

On Thursday, BenarNews contacted Tesla’s headquarters in Austin, Texas, by email and phone but did not immediately hear back or get an answer.

On his way back to Jakarta from the U.S.-ASEAN Summit in Washington, Jokowi met Musk at the SpaceX launch site in Texas on Saturday, after which the president said he discussed “technology and innovation” with the businessman who is the world’s richest person.

Musk, for his part, said he was “fired up” by Indonesia’s enthusiasm.

“We’re going to look closely from the Tesla and SpaceX standpoint to try to do some partnerships in Indonesia,” he said in a video that circulated online after the meeting.

“And, like I said, I think the future of Indonesia is very bright. I think we were looking closely to a potential collaboration on many, many fronts,” the multi-billionaire added.

A statement issued over the weekend from Jokowi’s office said Musk planned to visit Indonesia in November, the same month when the Southeast Asian nation hosts the G-20 summit.

Jokowi-Musk-new.jpg
Indonesian President Joko Widodo listens during his meeting with Elon Musk, the founder and CEO of Tesla Motors, at the SpaceX launch site in Boca Chica, Texas, May 14, 2022. [Courtesy of Laily Rachev/Indonesia's Presidential Palace/Handout via Reuters]

World’s largest nickel producer

Meanwhile, some analysts welcomed the news of Tesla’s entry but questioned whether Musk was serious about investing in Indonesia, or if the Southeast Asian nation had what it takes to host a “Gigafactory.” A Gigafactory is how the trade refers to Tesla’s manufacturing plants.

Indonesia produces 1 million cars a year that are mostly fueled by gas tanks but is trying to grow its electric vehicle market.

South Korea’s Hyundai recently launched its first electric vehicle manufactured at its Indonesian plant, the Ionic 5. Meanwhile, China’s Wuling Motors is set to roll out small electric vehicles from its Indonesian plant later this year.

Tauhid Ahmad, a researcher at the Institute for Development Economics and Finance, said Tesla was unlikely to be able to compete with Chinese and South Korean carmakers in Indonesia in terms of pricing.

“I think if it wants to be a market player in Indonesia, Tesla must be bold and lower prices. But is that possible?” Tauhid told BenarNews.

Last year, Hyundai and LG Energy Solution began constructing a $1.1 billion electric vehicle battery plant near the Indonesian capital.

The plant is being constructed by a consortium of South Korean companies including Hyundai Motor Co., KIA Corp., Hyundai Mobile and LG Energy Solution in cooperation with PT Industri Battery Indonesia, a joint venture of state-owned energy and mining companies.

The Hyundai-LG Energy Solution plant is part of a $9.8 billion (139.5 trillion rupiah) electric vehicle battery deal between Indonesia and South Korea signed in Seoul in 2020.  

When finished, it is expected to be capable of producing battery cells to power 150,000 electric vehicles per year. Battery production is expected to start next year.

While the government’s announcement was “good news,” details of the deal and benefits for Indonesia from a Tesla investment, including jobs and technology transfers, needed to be made clear, said Ninasapti Triaswati, an economist at the University of Indonesia.

“What the Indonesian government needs to prepare is what kind of incentive package is given to Tesla,” whether they are tax breaks or lower import duties, Ninasapti told BenarNews.

“We need to wait for realization by Tesla through the signing of a cooperation contract,” she said.

Yayan Satyakti, an economist at Padjadjaran University, said Tesla’s main considerations in investing in Indonesia could be a lower import tariff than competitor India and a more favorable industrial ecosystem, being the world’s largest nickel producer.

But he questioned whether Indonesia had the infrastructure required to host a Tesla factory, including electricity and ports, as well as manpower. 

“Tesla has great potential to grow further as people shift to non-fossil fuel-based transportation to tackle global warming,” Yayan told BenarNews.

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