Negotiations Failed Over; Tesla’s Plan To Build Factory In Indonesia Fall Through

Tesla will not build a factory in Indonesia after failing to reach an agreement with the government over, among other things, terms relating to the supply of raw materials for power generators.

This is following the news where the U.S. automaker sent delegations to Indonesia to discuss potential investment in a supply chain for its electric vehicles a year ago.

Two Indonesian government officials, in their statement, said that is the case after Tesla did not respond to an e-mail sent to the clean energy giant.

Tesla was interested in building up a plant to produce Energy Storage Systems, portable equipment that can store tens of megawatts of electricity and be deployed in remote places, according to senior Indonesian officials, including Nicke Widyawati, the head of an Indonesian state oil business.

The Indonesian government announced in February 2021 that it had received a proposal letter from Tesla and that it was pleased to cooperate with a company that has world-class lithium battery technology.

On September 15, a consortium led by LG Energy Solution, a subsidiary of LG Chem, broke ground in Karawang, West Java, for the development of a US$1.1 billion (S$1.5 billion) electric vehicle battery factory with an initial capacity of 10 gigawatt-hours and a progressive capacity increase to 30GWh.

Meanwhile, China's Contemporary Amperex Technology (CATL) has pledged to invest $5 billion in Indonesia by 2023 and $15 billion through 2028.

In November 2020, CATL and an Indonesian state business signed a memorandum of understanding.

CATL is the world's largest lithium-ion battery manufacturer, with LG Chem third.

Indonesia, which possesses the world's greatest nickel reserves, is eager to construct a complete supply chain for the resource, from battery chemicals extraction to battery manufacturing to electric vehicle manufacturing.

President Joko Widodo said on March 16 at the introduction of Indonesia's first locally-made electric vehicle, Hyundai's Ioniq 5, saying the country was rich in natural resources.

"We have nickel, cobalt, the key materials to make lithium batteries, and bauxite that could be processed into aluminium and, in turn, be used to make electric vehicle frames, as well as copper that is also needed by batteries and wiring systems in electric vehicles.", said the president.