Strategic steps need to be taken to support the development of the national electric vehicle industry. These steps can be taken by encouraging the development of battery technology. The Presidential Regulation number 55 year 2019 has been released and is directed towards growing a new market for battery-powered electric road vehicles. It also regulates the manufacture of battery-powered electric road vehicles and components.
In Indonesia, both upstream and downstream nickel processing industries are available. Since 2014, the downstream nickel industry has grown much higher than nickel mining. This is because of the ban on nickel exports which was finalized in January 2014. The abundance of domestic nickel resource and nickel processing industries has made the battery cell for electric vehicles in Indonesia very promising.
Why invest in battery cell industries in Indonesia?
Batteries are the key components to electric vehicles and contribute to 25-40% of the cost of the vehicle itself. Building an electric vehicle battery cell factory in Indonesia means that the costs of the components can be reduced up to 30-40%. This is because Indonesia is rich in natural resources needed to manufacture these electric vehicle batteries.
Indonesia is known as the largest producer of nickel ore, which is the main raw material to produce lithium batteries. In 2019, Indonesia was able to produce 29,6% of the world’s total nickel ore production, which is more or less 800.000 metric tons of nickel ore. Because Indonesia has the largest nickel ore reserve in the world, Indonesia is able to produce large amounts of nickel ore while still having a sustainable production of nickel ore.
Manufacturing costs are also one of the biggest concerns when it comes to investing in an industry. Luckily, Indonesia has one of the lowest manufacturing costs in Asia. This is due to the fact that Indonesia has some of the lowest labour costs and industrial power prices. Labour and electricity account for 6% of the total battery costs. Indonesia is also rich in natural reserves of nickel and cobalt, which are key battery materials that make up 22% of the total battery pack costs.
Lower manufacturing costs means that Indonesia will be able to sell electric cars at a more reasonable and competitive price. If the prices are competitive, then the electric vehicles will be more accessible to Indonesian citizens. This will help encourage Indonesian citizens to use electric vehicles and thus boost the sales of electric vehicles.
Current status of Indonesia’s battery cell industry
An electric vehicle battery cell factory will soon be built in Indonesia. The factory will be built by the Hyundai Consortium which consists of the Hyundai Motor Company, KIA Corporation, Hyundai Mobis, and LG Energy Solution. The total investment value is around US$1.1 billion, which is equivalent to Rp15.9 trillion. Once built, this company will be able to employ around 1,000 workers.
The government, through the Minister of Investment/BKPM Chairman has agreed to sign a Memorandum of Understanding (MoU) at an online event with the Hyundai Consortium and PT Industri Baterai Indonesia (IBI). PT IBI is the SEO battery holding which is a combination of four SEOs, which are PLN, Pertamina, MIND ID, and Antam. The battery cell factory will be built in Karawang, West Java. The company itself will have a production capacity of 10 gigawatt hours (GWh) for Hyundai’s electric vehicles.
This collaborative project will not only focus on the manufacture of conventional vehicles, but also aim to make Indonesia one of the centres for the development of a battery-based electric vehicle ecosystem. That being said, the aim is also to produce batteries competitively to meet Indonesia’s needs and also to be able to export battery cells.
Pahala Nugraha Mansury, the vice minister of BUMN, has stated that through this collaboration IBI will not only have a factory. IBI will be an integrated electric battery industry. This is because Indonesia is aiming to have mining facilities, smelting facilities, precursory production, battery packs, and will even try to have an energy storage stabilizer and recycling.