4 min read –
And nickel might make that dream come true.
Indonesian nickel and the dream of a national car
Indonesia’s Nickel Ambitions
Indonesia has emerged as a global leader in nickel production, a crucial metal for electric vehicle (EV) batteries, and its ambitious approach to resource management signals a promising future.
While some observers highlight challenges, Indonesia’s bold strategies in developing its nickel industry and fostering an EV supply chain demonstrate its commitment to sustainable growth and global relevance in the green energy transition.
A Bold Vision for Resource Management
In 2014, Indonesia took a decisive step by banning the export of unprocessed ores.
This policy aimed to retain more value domestically, fostering investment, creating jobs, and advancing industrialization.
The results have been impressive.
Since the ban’s enforcement in 2020, Indonesia’s share of global refined nickel production has skyrocketed to nearly 50%, supported by innovative smelting technologies and significant investment from global players, particularly from China.
By 2023, processed nickel exports reached $22 billion, a substantial leap from just $1 billion in 2019, solidifying Indonesia’s position as a cornerstone of the global nickel market.
Driving the EV Revolution
Indonesia’s resource nationalism extends beyond nickel smelting.
The government envisions a complete EV supply chain within the country, encompassing mineral extraction, processing, battery production, and vehicle assembly.
With its vast reserves of nickel, cobalt, and copper, Indonesia has the natural resources necessary to achieve this vision.
Investments in EV infrastructure, subsidies to promote domestic EV adoption, and partnerships with major automakers like Hyundai and BYD underscore Indonesia’s dedication to building an EV ecosystem.
While skeptics argue that the EV supply chain’s development is uneven, it is essential to recognize that such transformation takes time.
The progress made in Central and South-East Sulawesi, where nickel-smelting complexes have driven manufacturing growth and foreign direct investment (FDI), highlights the potential for broader industrialization.
These efforts have already created hundreds of thousands of jobs, particularly during the construction phases of industrial sites.
Expanding Opportunities: Tire Manufacturing
In addition to nickel and EV battery production, Indonesia’s abundant natural resources present further opportunities for industrial growth—notably in tire manufacturing.
Indonesia is the second-largest producer of natural rubber worldwide (behind Thailand), accounting for approximately one-third of global natural rubber production
However, despite its leading position in rubber production (rubber powder), Indonesia’s domestic tire manufacturing industry remains underdeveloped because of challenges related to :
-raw material sourcing (synthetic rubber, and carbon black must be imported)
-technological capabilities
-and market dynamics.
Currently, most tires used in Indonesia are imported, primarily from China, Japan, Thailand.
Developing a domestic tire manufacturing industry could not only reduce dependence on imports but also align with Indonesia’s broader strategy of creating a fully integrated EV supply chain.
By leveraging its rubber production capacity, Indonesia has the potential to become a global hub for tire production, further supporting the growth of its automotive and EV industries.
Addressing Challenges with a Pragmatic Approach
Indonesia’s strategy is not without challenges.
Concerns about environmental impacts, uneven job creation, and competition from neighboring countries like Thailand and Vietnam are valid.
However, these issues are not unique to Indonesia and stem from the global demand for EV batteries, driven by the world’s shift towards sustainable transportation.
Blaming Indonesia for environmental concerns overlooks the global necessity for such industries and the shared responsibility to mitigate their impacts.
The Indonesian government has shown its commitment to sustainability by requiring investors to adhere to environmental regulations and encouraging the development of eco-friendly technologies.
Moreover, as global EV markets mature, Indonesia can further enhance its competitiveness by focusing on niche areas, such as producing nickel-battery precursors or developing lightweight, cost-effective EVs powered by lithium-iron-phosphate (LFP) batteries.
The Global Market and Nickel’s Role
The rise of LFP batteries has sparked concerns about the future demand for nickel.
While LFP batteries offer cost advantages and durability, nickel-based batteries remain indispensable for applications requiring higher energy density and longer ranges.
As global EV markets diversify, there is room for both technologies to coexist, ensuring a sustained demand for nickel.
Additionally, Indonesia’s dominance in nickel processing positions it as a key player in the global EV battery market, even as technology evolves.
A Bright Future Ahead
Indonesia’s nickel industry represents more than just economic gains; it is a testament to the country’s resilience and ambition.
By investing in downstream industries, fostering FDI, and promoting sustainable practices, Indonesia is laying the groundwork for long-term prosperity.
Its leadership in nickel production and its efforts to develop an EV supply chain are steps in the right direction, demonstrating that resource-rich nations can play a pivotal role in the global green energy transition.
As the world accelerates toward a low-carbon future, Indonesia stands out as an example of how bold policies, innovation, and international collaboration can drive sustainable development.
With the right mix of strategy and execution, Indonesia is poised to become a global hub for nickel and EV production, powering not just its economy but also the world’s transition to cleaner energy.
Reviving the Dream of a National Car
Indonesia’s aspirations for the automotive industry are not new. In 1996, Tommy Suharto, the youngest son of the country’s then-dictator, launched the Timor, a national car initiative.
The plan was ambitious: import models from South Korea’s Kia Motors, rebrand them, and foster local car manufacturing expertise through strict local-content requirements.
However, the project faltered amid the 1997 Asian financial crisis, leaving thousands of unsold cars and marking a premature end to the Timor dream.
Despite its failure, the Timor symbolized Indonesia’s ambition to establish its own automotive brand.
Today, with a burgeoning EV supply chain and a renewed focus on industrialization, Indonesia has the opportunity to rekindle the dream of a national car.
Leveraging its growing expertise in EV production, the country could develop a homegrown automotive brand that embodies sustainability, innovation, and national pride.
By integrating domestic resources such as nickel, rubber, and copper, and fostering partnerships with global technology leaders, Indonesia could establish itself as a major player in the global automotive market.
With the right investments and policies, a successful Indonesian car brand may no longer be a distant dream but an achievable milestone in the coming years.
Follow us on LinkedIn for weekly information on doing business in Indonesia.
Sources : The Economist, Perplexity, Cintasia