Indonesia wants to be a manufacturing superpower

The United States is desperate to move the supply chain for electric vehicles — especially battery materials — inland after 50 years of offshoring all facets of American manufacturing, mostly to China. The new law on reducing inflation is a big step forward on the road to rebuilding national production. But other countries also want to have fun. Indonesia is one of the world’s largest suppliers of nickel, a metal essential for the production of lithium-ion batteries.

Last week, the Indonesian government announced a long-term deal to supply $5 billion worth of nickel to Tesla over the next 5 years. It is also a major source of other metals, as well as coal and palm oil, and is willing to use export taxes and bans to incentivize companies to invest in its manufacturing base.

To help realize his vision of a fully fledged electric vehicle manufacturing industry, President Joko Widodo is considering a new tax on nickel exports, a move that would have big ramifications for automakers. Despite the latest deal with Tesla, Indonesian officials are still holding talks with Tesla and other major automakers to encourage them to invest in manufacturing plants.

Widodo said last week in an interview with Bloomberg News editor John Micklethwait, “What we want is the electric car, not the battery. For Tesla, we want them to build electric cars in Indonesia. We want a huge ecosystem of electric cars. Jokowi, like he is called, said he had similar expectations of Ford, Hyundai, Toyota and Suzuki as he sought to ensure that his country was not just a supplier of raw materials or A component maker A team from Tesla visited several sites in Indonesia in May, including Morowali Industrial Park, a hub being developed as a key site for the nickel industry in Central Sulawesi, according to Indonesian officials.

Discussions with Tesla about potential investments in the country are ongoing, according to Jokowi. “It’s always a discussion,” he said when asked what’s holding back a deal with Tesla. “Everything needs time. I don’t want to be quick without results. It takes intense communication and the result will be seen. Jokowi met Elon Musk in Texas earlier this year. Musk said he was considering a visit, “hopefully in November,” to Indonesia to explore the opportunities. The government has held talks about various potential partnerships with Musk in recent years, including the possibility of a SpaceX rocket launch site in the country, but no deal has been reached.

Indonesia’s plans for a possible tax on nickel – a key material for powerful, long-range EV batteries – drove prices for the metal higher last week. Nickel has jumped nearly a third since the start of last year. While the new tax could dampen short-term sales, Jokowi has his eye on future profits. Refining nickel at home to supply makers of electric vehicle components, rather than shipping raw materials overseas, could create up to $35 billion in added value, he estimates.

Takeaway meals

Elon Musk recently talked about building 10-12 more Tesla factories around the world. Canada seems to be a possibility. Indonesia could certainly be another. According Wikipedia, Indonesia’s economy is the largest in Southeast Asia. The country is a member of the G20 and is classified as a “newly industrialized country”. A Tesla factory in Indonesia would help propel the country’s economy forward and give Tesla a foothold in several emerging markets.

Many countries are reconsidering the wisdom of globalization, which has primarily benefited rich countries. For some, it’s just another version of the exploitative mentality that began when Columbus sailed the blue ocean in 1492 and reported to his Spanish masters that the indigenous peoples of the Caribbean were so docile that they would make excellent slaves.

India basically told Tesla to build cars there or forget to sell its wares to its people. Now, even the United States is making noise for requiring companies to build cars in America using battery materials sourced from the United States or at least sourced from countries they deem acceptable. The globalization bubble has not burst, it has burst and the results are only beginning to be felt. As Indonesia goes, so can the world go.


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Marjorie N. McClure