Tesla and Indonesia agree on nickel supply deal worth $5 billion

CNBC Indonesia reports that Tesla and the Indonesian government have reached an agreement for that country to supply nickel worth $5 billion to Tesla over the next 5 years. The deal apparently means Tesla won’t rely primarily on iron phosphate batteries for its vehicles going forward. Since Google Translate doesn’t work well with Indonesian, we’ll defer to Reuters and other sources of information for details.

In May, Indonesian President Joko Widodo met with Elon Musk to discuss expanding Tesla’s business relationship with Indonesia, which has Southeast Asia’s largest economy. The government would like Tesla to build a new factory in the country and maybe this new trade deal will make Tesla more receptive to this idea.

“We are still in constant negotiation with Tesla…but they have started buying two great products from Indonesia,” Coordinating Minister of Maritime Affairs and Investment Luhut Pandjaitan said in an interview broadcast on Monday. He added that Tesla had signed a five-year contract with nickel processing companies operating out of Morowali on the island of Sulawesi. Nickel materials will be used in Tesla’s lithium-ion batteries, according to Reuters.

Indonesia aims to become a manufacturing hub for electric vehicles and batteries and halted nickel ore exports to ensure supplies for investors earlier this year. The move had the intended effect of attracting investment from Chinese steel giants and South Korean companies like LG and Hyundai. However, most nickel investment so far has gone into the production of raw metals such as nickel pig iron and ferronickel.

The government plans to impose an export tax on these metals to boost revenue while further encouraging domestic production of higher-value products, a senior official said. Reuters Last week.

CnEVPost has an interesting insight into it all. He says that at the end of July, two Chinese companies – Zhejiang Huayou Cobalt and CNGR Advanced Material Co – announced that they would supply Tesla with ternary precursors for battery materials, namely materials of nickel, cobalt and manganese. The latest reports, as well as the previous announcement, have led to speculation that the two Chinese companies could be the suppliers behind the contract for Tesla. Both have nickel smelting facilities in Indonesia.

If so, these supplies will not be for electric vehicles for sale to U.S. customers, as the new electric vehicle incentives contained in the Cut Inflation Act do not apply to vehicles equipped with batteries whose raw materials come from China or from Chinese companies. But Tesla is free to sell these vehicles in any other global market and likely intends to do just that.

And for a new factory in Indonesia? Elon recently considered building 10-12 new factories around the world. There’s no reason one of them shouldn’t be in Indonesia.

Featured Image: Screenshot from Tesla Battery Day 2020 video on YouTube


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