Indonesia Plans To Develop An EV Industry Based Around Nickel

The growth in electric vehicles is opening new opportunities for Indonesia.

Matthew Averay
Aug 11 · 4 min read

Indonesia offers investors an incredible opportunity for economic growth. With a population of over a quarter of a billion people spread across 17,000 islands, there is an abundance of human and natural resources to drive industrial development within the country. The changing nature of technology is now opening new opportunities as Indonesia is the largest producer of nickel in the world. Nickel is integral in the production of Lithium-Ion batteries required to run the next generation of electric vehicles.

Indonesia is intent on developing industries downstream from its mining of resources. The changing legislative policies concerning the export of ores are indicative of Indonesia’s intentions to leverage their natural resources for development growth. This plan stands to strengthen Indonesia’s economy over the next 50 years.

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Indonesia produces over half a million tonnes of nickel per annum and has deposits stretching across several major islands. These deposits represent a quarter of the world’s known nickel reserves. So important is Indonesia to the global supply of nickel that an announcement last year to bring forward a ban on nickel ore exports caused a large spike in nickel’s price. The metal is integral to the production of high-grade stainless steel and Indonesia plans to force the development of downstream mining businesses such as smelters. The corresponding increase of internal production capacity will stimulate wider economic growth.

Although the global market for stainless steel is robust and growing, Indonesia’s ban on nickel exports is an indication of a bigger vision. Nickel usage is set to grow in line with the reliance on batteries for electric vehicles. The metal is used to improve the power storage and charging capacity of Lithium-Ion batteries and is a vital element in their production. It is this competitive advantage that Indonesia plans to use to drive investment in new industrial sectors.

Indonesia is ideally positioned to develop an electric vehicle industry. Not only does it have access to nickel it also has a large population which is heavily reliant on trucks, cars and motorcycles for transport. Because of this, Indonesia not only holds a competitive edge in the raw materials for electric vehicle production but also holds access to a significant internal market. Beyond the economic benefits of a new electric vehicle industry, there will also be improvements in the environmental impacts that electric vehicles will bring to a nation heavily reliant on fossil fuels.

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The economic effects of new industries in a country where the average salary is a few hundred dollars per month are not to be underestimated. The global market for electric vehicles is growing with sales up 24% last year. It is estimated that within the next five years electric vehicles will account for 14% of all global vehicle sales. Most automotive manufacturers have plans to solely produce electric vehicles by 2050. In the medium term, this indicates a trend towards larger battery sizes until the technology is improved. This will drive increased global demand for lithium-ion cells which Indonesia can export as well as leverage to stimulate new industrial development.

The batteries required for electric vehicles are based around several key elements. Nickel, lithium, cobalt, graphite and manganese are all essential to produce batteries with the capacity to power electric vehicles. Although the supply of these commodities is currently able to meet demand things will change with the increasing penetration of electric vehicles. Unless the appropriate battery technology can be developed and implemented into supply chains with greater speed, there are concerns that the electric vehicle industry will be unable to meet its targets. As a primary producer of core materials, Indonesia is dangling these natural resources as a carrot to entice the automotive industry to make billions of dollars of direct investment into the Indonesian economy.

A clear strategy to leverage nickel deposits to develop internal industries within Indonesia signals an opportunity for investors in nickel. Those willing to intelligently position themselves within the Indonesian market stand to benefit from the impending economic growth. The industrial use of nickel is only set to grow globally and generate vibrant and profitable new industries within Indonesia. Companies with connections and skillsets to leverage have an opportunity to establish themselves in what will only be a growing marketplace. The outlook for the nickel market within Indonesia is bright.

Enegra Group Ltd (LL15959) is a commodity trading company focused on resources in Southeast Asia. Equity in Enegra has been tokenised via the EGX security token. For enquires related to the purchase of EGX please contact support@enegragroup.com.

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