President Jokowi Is Confident That Tesla Will Invest In Indonesia, Starting With EV Batteries

President Jokowi met with Elon Musk in Texas, USA. (photo: Instagram @jokowi)

JAKARTA - Presiden Joko Widodo is confident that Tesla Inc will finalize a deal to invest in production facilities in Indonesia. The reason, the government has offered incentives to this US automaker ranging from tax breaks to concessions to mine nickel.

Jokowi has been courting Tesla to invest in battery and electric car manufacturing since 2020, as well as seeking to tap into its rich reserves of nickel ore, which can be processed for use in EV batteries.

President Jokowi has even held talks with Tesla Chief Executive Elon Musk twice. Like meeting Musk in person at a SpaceX facility in Texas last year and over the phone, to try to get a deal.

"I told him if you invest in Indonesia, I'll give you a nickel concession," Jokowi said in an interview with Reuters, referring to Indonesia's offer of mining concessions.

Other incentives include tax breaks and a subsidy scheme for EV purchases to build Tesla's market in Indonesia, which is the fourth most populous country in the world. Jokowi also added that his ministers were finalizing electric vehicle subsidies.

The president said he was "certain" that Indonesia had an advantage over other countries that Tesla might consider investing in because it has the largest reserves of nickel and a large domestic market.

Jokowi said it was up to Tesla to accept the offer to mine nickel, underlining that Indonesia was open to investment in the supply chain of EV batteries and electric cars. "If they want to start from an EV battery, that's fine," he added.

While Tesla himself did not immediately respond to a request for comment from Reuters about it.

Tesla is looking for additional manufacturing centers. The company currently manufactures EVs at four locations: Fremont, California; shanghai; Austin, Texas and outside the US as in Berlin. Analysts estimate that Tesla will need to build another seven or eight "gigafactories" to meet Musk's target of selling 20 million electric vehicles by 2030.

Apart from Indonesia, South Korea, Canada and Mexico are also eyeing Tesla to invest in manufacturing. A spokesman for the President of Mexico said on Tuesday January 31 that Tesla was considering setting up an assembly plant near Mexico City's new airport.

Analysts said Mexico could have an edge over winning Tesla investment because of its proximity to its main market in the United States, a well-established supply base for components and because vehicles built there could qualify for the Biden administration's consumer tax credit.

First in Asia

If Tesla invests in battery production in Indonesia, it will be the first such facility in Asia. Last month, the company announced a $3.6 billion investment to expand battery production at its Nevada plant.

The Indonesian government itself banned the export of nickel ore in 2020 to encourage investors to build a vertically integrated battery and electric vehicle supply chain, using the metal as a raw material.

The ban has led to heavy investment in nickel smelting, mostly from China, but has also been challenged at the World Trade Organization (WTO) by the European Union, which says the ban is unfairly hurting its stainless steel industry.

The WTO last year won the EU lawsuit, but Indonesia is still appealing.

Indonesia is also seeing increased interest in investing in EV or battery production, with South Korea's Hyundai Motor Co and LG Energy Solution having set up EV and battery factories.

Ministers last year said Tesla had signed contracts worth around $5 billion to procure their battery materials from nickel processing companies.