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Tesla Might Be Close To Opening A Factory In Indonesia In Exchange For Nickel Mining Rights

According to reports, Tesla is close to signing a deal to open a manufacturing facility in Indonesia. The country has the highest nickel deposit in the world and Tesla's decision appears to be necessitated by Indonasia's ban on raw nickel exports, and the EV maker's decision to enter into nickel mining.

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According to a report by Reuters, Tesla is close to finalizing a deal to open a factory in Indonesia. Reuters cites Indonesian President Joko Widodo and says that the President “is confident Tesla Inc will finalize a deal to invest in a production facility in his country, having offered the U.S. car maker incentives ranging from tax breaks to a concession to mine nickel.”

The southeast Asian country is the world’s top producer of nickel. Producing more than twice as much Nickel as the country in second place, the Philippines.

Indonesia, on January 2020, banned the sale of unprocessed nickel ore. This has left a huge gap in the worldwide supply of the mineral. The country with the ban plans to incentivize local manufacturing of value-added products.

Indonesia, in the long run, has plans to go beyond simple mineral processing. The country has aspirations to be a hub for nickel end-product manufacturing. Starting from batteries all the way to electric vehicles. This makes it a good fit for Tesla. Which has a high demand for nickel and is planning to increase its manufacturing locations throughout the world.

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Tesla in the past has indicated its desire to increase nickel supply. CEO Elon Musk, speaking at the company's Q2 2020 earnings call said “any mining companies out there, please mine more nickel. Wherever you are in the world, please mine more nickel and don’t wait for nickel to go back to some high point that you experienced some five years ago.

Continuing Musk said, “Go for efficiency, obviously environmentally-friendly nickel mining at high volume. Tesla will give you a giant contract for a long period of time. If you mine nickel efficiently and in an environmentally sensitive way. So hopefully this message goes out to all mining companies.”

However, beyond asking mining companies to increase their nickel output, Tesla is also looking into mining the mineral itself. On the Battery Day presentation, Tesla outlined a number of breakthroughs that will help the company produce nickel in a more efficient manner.

One such breakthrough is the elimination of sulfur intermediate products. The way nickel is currently produced, the raw metal from the mine is combined with sulphuric acid and a huge amount of water.

However, before the nickel can be put into batteries the metal sulfate has to be converted back to nickel powder. This increases cost, production time, and water waste. Tesla, according to a new process it is pioneering will eliminate this intermediate process and will be moving to consume the raw metal powder from the mines. This also eliminates water waste.

And given the abundance of Nickel in the country, Indonesia appears to be an ideal place for Tesla to implement this new process. However, due to Indonesia’s ban on raw nickel export, it appears that the EV maker will need to make a substantial investment in the country before getting access to Indonesia’s Nickel.

This is further corroborated by President Widodo who recalled a conversation he had with Elon Musk – "I said to him that if you invest in Indonesia, I will give the concession of nickel."

However, luckily for Tesla in addition to Nickel mining rights, Indonesia is offering Tesla other incentives to lure the EV maker to build a manufacturing plant in the country. According to Reuters, the “incentives include tax breaks and a subsidy scheme on EV purchases to build a market for Tesla in the world's fourth most populous country.

President Widodo says, currently, his ministers are finalizing the subsidies the country is looking to offer the EV maker.

And in more good news, in order to get access to the country’s nickel, Tesla will not be required to build a full EV manufacturing site as President Widodo has said “If they want to start from EV battery, it's OK.”

Currently, Indonesia and Tesla appear close to reaching a consensus on nickel mining and a new factory. And we will be sure to keep you posted once we learn more about the final deal. Until then make sure to visit our site regularly for the latest updates.

So what do you think? Is Indonesia a good location for Tesla to open a new factory? Also, do you agree with Indonesia’s decision to ban the export of raw nickel? Let me know your thoughts in the comments below.

Image: Courtesy of Tesla

For more information check out: Tesla Mexico Factory Rumors Reemerge, Now Including Far-Fetched Claims About Exporting Vehicles By Plane

Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.

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NeilT (not verified)    February 2, 2023 - 9:43AM

Nobody seems to make the other connection. ASEAN has a FTA with India. Cars manufactured in Indonesia (member of ASEAN), would face minimal barriers to be sold in India.

Given the position of India to Tesla vehicles from China, this would be a key decision factor for Tesla. Although it would put India plans back by around 2 years or so.