Giga Factory in Indonesia
Multiple sources are reporting that Tesla is close to an initial deal to build a factory in Indonesia, according to many people familiar with this matter. Tesla is looking to tap into Southeast Asia's key battery materials.
This Giga Factory would produce around 1 million vehicles per year and that is about the number Tesla has stated each of its Giga Factories should build - anywhere between 1 to 2 million vehicles per year.
Of course, the deal to build this Giga Factory could fall through and not happen, but we think this is going to happen and is a very important strategic move for Tesla. The reason is that Indonesia is a large market with a high tariff barrier unless you setup shop inside the country.
Indonesia wants Tesla to build a Giga Factory. President Joko Widodo visted Elon Musk in May, 2022 and created a $5 billion nickel supply agreement with Tesla in August, 2022. This would be Tesla's 3rd Giga Factory outside the United States.
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What Will It Build?
An important question is what will this Giga Factory in Indonesia build? Will it just build the Model 3 and the Model Y vehicles? I think this is probably true, but I wonder, what is the world-wide market for these two vehicles - is there a limit?
Giga Shanghai and Giga Berlin are heavily building the Model Y and Model 3 and I think Tesla needs to start considering building its compact vehicle from one of these new factories in addition to the Cybertruck.
The Model Y is a fantastic vehicle as is the Model 3 and Tesla will be able to get very far with these. But, eventually, the cost becomes too much for lower markets and Tesla will either need to lower prices more for the Model 3, or build its compact vehicle.
I also think Tesla will build its Megapack product from this factory. It's important to note that if Tesla is no longer battery cell constrained, that they can ramp the Energy Business as fast as possible from this factory.
A final option for Tesla would be to focus mostly on batteries from this location to take advantage of the mineral rich location. So Tesla could announce most of the factory would be to produce batteries.
I expect there to be an announcement in the next month or two regarding this new factory in Indonesia.
What do you think of Tesla building a new Giga Factory in Indonesia? Is this a good strategic location?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.