Indonesia to tap nickel laterite, make batteries to become EV hub

JAKARTA (Reuters) - Indonesia plans to start processing its rich supplies of nickel laterite ore for use in lithium batteries on the way to becoming a global hub for producing and exporting electric vehicles (EVs) to Asia and beyond, a senior minister told Reuters.

Southeast Asia’s biggest economy is hoping a $4 billion Chinese-led project to produce battery-grade nickel chemicals will pay dividends by helping to attract EV production into the country.

“We have to be a global player,” Coordinating Maritime Minister Luhut Pandjaitan said in an interview, in which he mapped out a broader strategy to go beyond simply exporting batteries or battery chemicals.

Indonesia, the second-largest car production hub in Southeast Asia after Thailand, last month announced plans to introduce a fiscal scheme that will offer tax cuts to EV battery producers and automakers, as well as preferential tariff agreements with other countries that have a high EV demand.

“Of course, maybe we can export these batteries ... But then, if you build a factory here you can also supply batteries to cars produced in Indonesia,” said Pandjaitan, who also oversees energy, mining and transportation.

“Our strategy is we can export (EVs) to Australia because we have a trade agreement, and also to ASEAN (Association of Southeast Asian Nations) and domestically,” he said.

Indonesia and Australia are expected to sign a long-awaited free trade agreement next month.

Industry Minister Airlangga Hartarto told a briefing to foreign correspondents on Feb. 13 that Indonesia aimed for 20 percent of vehicle production in the country to be EVs by 2025, representing 400,000 vehicles. He said investment in EV production was expected from companies in South Korea, Japan, China and Europe.

The deputy minister for industry, Harjanto, also said last December that Hyundai Motor Co, the world’s No.5 automaker, plans to start producing EVs in Indonesia as part of an $880 million auto investment in the country.

Japan’s Mitsubishi Motors announced in 2018 as well that it would partner with the Indonesian government to expand the use and availability of EVs in Indonesia.

Developers started building a lithium battery project in Morowali, on the Indonesian island of Sulawesi, last month led by Chinese companies including battery firm GEM Co Ltd and units of lithium battery maker Contemporary Amperex Technology Ltd (CATL) and stainless steel-maker Tsingshan Holding Group.

Analysts caution, however, on how quickly such plans can be carried out, as some of the required nickel smelter technology is complicated.

Reporting by Ed Davies and Kanupriya Kapoor; Editing by Tom Hogue