Tesla & Indonesia Agree On Nickel Supply Deal Worth $5 Billion
CNBC Indonesia is reporting that Tesla and the government of Indonesia have come to an agreement for that country to supply nickel worth $5 billion to Tesla over the next 5 years. The deal apparently means that Tesla will not be relying primarily on iron phosphate batteries for its vehicles in the future. Since Google Translate does not work well with Indonesian, we will rely on Reuters and other news sources for the details.
In May, Indonesian president Joko Widodo met with Elon Musk to discuss expanding Tesla’s business relationship with Indonesia, which has the largest economy in Southeast Asia. The government would love for Tesla to build a new factory in the country and perhaps this new business arrangement will make Tesla more receptive to that idea.
“We are still in constant negotiation with Tesla … but they have started buying two excellent products from Indonesia,” Coordinating Minister for Maritime and Investment Affairs Luhut Pandjaitan said in an interview broadcast on Monday. He added that Tesla has signed a five-year contract with nickel processing companies operating out of Morowali on Sulawesi Island. The nickel materials will be used in Tesla’s lithium-ion batteries, according to Reuters.
Indonesia is interested in becoming an electric vehicle and battery manufacturing hub, and stopped exports of nickel ore to ensure supply for investors earlier this year. That move has had the desired effect by attracting investments from Chinese steel giants and South Korean companies like LG and Hyundai. However, most nickel investment so far have gone to production of crude metal such as nickel pig iron and ferronickel.
The government plans to impose export tax on these metals to boost revenue while encouraging more domestic production of higher value products, a senior official told Reuters last week.
CnEVPost has an interesting insight on all this. It says that at the end of July, two Chinese companies — Zhejiang Huayou Cobalt and CNGR Advanced Material Co — announced they would supply Tesla with ternary precursors for battery materials, namely nickel, cobalt, and manganese materials. The latest reports, as well as the previous announcement, have led to speculation that the two Chinese companies may be the suppliers behind the contract for Tesla. Both have exiting nickel smelting facilities in Indonesia.
If so, those supplies will not be destined for any electric vehicles for sale to America customers, as the new EV incentives contained in the Inflation Reduction Act are not applicable to vehicles with batteries whose raw materials are sourced from China or Chinese owned companies. But Tesla is free to sell those vehicles in any other world markets and likely intends to do precisely that.
As for a new factory in Indonesia? Elon mused recently about building 10 to 12 new factories around the world. There’s no reason one of them couldn’t be in Indonesia.
Featured image: screenshot from Tesla Battery Day 2020 video on YouTube
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