Indonesia: Widodo steps up bid to woo investment from Tesla's Elon Musk

On the Friday call, Widodo and Musk discussed the industry and the main components for EV batteries, the investment ministry said in a statement. The president also asked Musk to consider Indonesia as a potential launch site for SpaceX, his aerospace manufacturing and space transport venture.

Widodo's call was another attempt by Jakarta to communicate with Musk after a delegation led by the president's top envoy, coordinating minister for maritime affairs and investment Luhut Pandjaitan, failed to meet him upon a visit to the United States last month. 

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Musk responded by saying he would send a team to Indonesia next month, according to the ministry. Tesla has not commented on the exchange and the ministry has not confirmed a date for the team's visit, saying only that discussions between both sides are continuing after the call.

"No fixed date yet, but [on Wednesday] we will have a video call with Tesla's global research and development and resources team," Jodi Mahardi, Luhut's spokesman, told This Week in Asia on Tuesday. "Tesla is the leading company in EV technology, so we want Tesla to see the potential in investing in Indonesia." 

President Joko Widodo plans to make Indonesia the world's biggest producer of lithium batteries. Photo: Reuters alt=President Joko Widodo plans to make Indonesia the world's biggest producer of lithium batteries. Photo: Reuters

While getting Tesla to invest was the current focus, Jodi said Indonesia welcomed EV investors from all countries, including China.

"We are open to investors from China, the US, Europe, we invite them all to invest, as long as they bring their best technology here and they employ local human resources as much as possible, provide them with training, and they do transfer of technology and knowledge, as well as using environmentally friendly technologies," he said.

Indonesia is the world's biggest producer of nickel, a key material in the production of lithium-based batteries for EVs; it exported 30 million tonnes of nickel ore last year, according to government data. The country also has the world's largest nickel reserves - which, at 21 million metric tonnes, are estimated to last for more than 30 years - ahead of the likes of Australia and Brazil.

To get into the lucrative EV battery supply chain, Jakarta has been trying to woo foreign battery makers to tap into the country's massive nickel reserves. It banned nickel ore exports on January 1 in a bid to develop its downstream mining industry, with nickel miners required to build smelter facilities in Indonesia. 

Widodo last month said meeting Musk was very important as "we have a great plan to make Indonesia the biggest producer of lithium batteries and we have the biggest nickel [reserves]".

 This isn't the first time Indonesia has hyped potential investment from Tesla. Industry minister Agus Gumiwang in October said the government was in ongoing discussions with the firm over the possibility of building a plant in the city of Batang, Central Java.

In July last year, coordinating investment minister Luhut said Tesla was part of a consortium building a US$4 billion mining plant in Sulawesi, the country's nickel mining hub, alongside the likes of Chinese battery manufacturer CATL and South Korea's LG Chem. LG Chem and CATL supply the batteries for Tesla's made-in-China vehicles, while its American-made cars' batteries are provided by Panasonic. 

The consortium's plant has not yet been built, but the Indonesian investment body last month said CATL would start construction of its own US$5.1 billion plant in Sulawesi next year.

A World Bank presentation for Widodo's administration last year highlighted some challenges impeding Indonesia's access to global EV supply chains, such as high import tariffs for vehicle components, lack of engineering talent, and restrictions to foreign direct investment that made logistics costs higher and electricity more expensive compared with neighbouring countries. 

Tesla CEO Musk's request for clean nickel is likely to be another challenge. In July, Musk said he would give "a giant contract for a long period of time" to any suppliers if they "mine nickel efficiently and in an environmentally sensitive way", highlighting the company's aim to produce its own batteries to cut costs. 

Tesla CEO Elon Musk wants nickel to be mined efficiently and in an environmentally sensitive way. Photo: DPA alt=Tesla CEO Elon Musk wants nickel to be mined efficiently and in an environmentally sensitive way. Photo: DPA

Conservationists fear that the growing global appetite for nickel is putting the already fragile environment in Sulawesi, one of the world's most biodiverse regions, at further risk. Coal-powered smelters in the island have already had an effect, according to Pius Ginting, executive coordinator of the Jakarta-based NGO Action for Ecology and People's Emancipation. 

"Our researchers have just returned from a village near nickel mines there and they see that the seawater has turned black," he said. "If nickel smelters are still powered by coal then the EV industry is still contributing to the Earth's greenhouse gas emissions, contrasting with their goal of reducing global carbon emissions and hindering the goal set by the Paris climate agreement." 

In October, an Indonesian nickel-smelting project being built by China's Tsingshan Group and their partner firms abandoned their request to dispose of waste in the ocean, a method called deep-sea tailings disposal, citing the "complexity of the impact of sea tailing". 

Jodi, the investment minister's spokesman, said Indonesia understood that clean-sourced nickel would be key for Indonesia to woo Tesla and other EV players to set up shop in the country. 

"We want to get into the global supply chain, that's why we always emphasise the importance of clean and environmentally friendly technologies to all investors because we really understand that those are the requirements to get into the supply chains," he said. "This is also to show our commitment to the Paris Agreement," he said. 

Additional reporting by Reuters

This article originally appeared on the South China Morning Post (SCMP).

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