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Indonesia
This Week in AsiaOpinion
Jefferson Ng
Dedi Dinarto
Jefferson NgandDedi Dinarto

Opinion | How Indonesia’s EV plans will shape its relations with the US and China

  • The market for electric vehicles is projected to explode over the next decade, making lithium-ion batteries an increasingly important geostrategic resource
  • Indonesia – with the world’s largest nickel reserves – is likely to be caught up in the intensifying technological rivalry between Beijing and Washington

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A lithium-ion battery production line at a factory in Dongguan, China. Photo: Reuters
Jefferson NgandDedi Dinarto
The market for electric vehicles (EVs) is projected to explode over the next 10 years as they become an increasingly important technology for the global clean-energy transition. By 2030, roughly 26 million EVs are expected to be sold worldwide, compared with 1.7 million last year. Even major companies such as Ford and General Motors plan to go fully electric by 2035.

With lithium-ion batteries constituting about 40 per cent of EV manufacturing costs, they will be an increasingly important geostrategic resource. According to a 2018 McKinsey report, annual battery demand will grow 10 times between 2020 and 2030, with EVs accounting for 80 per cent of battery demand.

A steady supply of lithium-ion batteries will become increasingly crucial for the automobile industry’s ability to remain competitive in the global marketplace. The delay in the planned roll-out of the Tesla Semi in the United States due to battery shortages, in contrast to the Hongguang Mini’s success in China, is a case in point.

More importantly, the EV revolution will be increasingly refracted through the lens of great power competition. Today, China is the world leader in the production of EVs and lithium-ion batteries. While there were 93 battery megafactories in China in 2020, there were only four in the US.

Furthermore, China has secured stable supplies of critical raw materials such as lithium, nickel, and cobalt. It produces the bulk of midstream products such as the chemicals, cathodes, and anodes needed to assemble battery cells. In contrast, the US is almost entirely dependent on imports and has been slow to develop a raw material supply chain.

The upcoming EV revolution is likely to be a significant economic boon for Indonesia, which possesses the world’s largest nickel reserves and produces cobalt as a by-product. Not willing to be a supplier of raw materials, Indonesia has been pursuing an ambitious plan to develop a national EV industry.
Annual lithium-ion battery demand is expected to grow 10 times between 2020 and 2030. Photo: AFP
Annual lithium-ion battery demand is expected to grow 10 times between 2020 and 2030. Photo: AFP

This will include mining and refining, producing battery-grade nickel chemicals, battery parts, battery cells, and EVs. By 2030, Indonesia aims to build 140 gigawatt hours (GWh) of battery production capacity, equivalent to five of Tesla’s battery gigafactories in Nevada, with plans to export about 50 GWh.

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