Indonesia keen to partner with Australia as it strives to be a global electric vehicle hub

Solo Mayor Gibran Rakabuming, eldest son of Indonesian President Joko Widodo, has just handed out 61 electric motorcycles to government workers in the Central Java city of Surakarta.

“More comfortable, more environmentally friendly,” Mr Rakabuming said, adding the electric motorcycles were cheaper than other government vehicles to buy and run.

Mr Rakabuming’s decision is in line with a presidential instruction issued in September 2022, stating electric vehicles should be used as official vehicles for central and regional governments.

That instruction is part of a broader Indonesian government strategy aimed at increasing the use of electric vehicles on local roads, which are teeming with millions of carbon-emitting motorcycles every day.

At the same time, Indonesia is striving to become a global electric battery and vehicle manufacturing hub.

And it wants Australia’s help to realise the ambition.

“Ever since COVID, there’s been discussion in Indonesia on how to actually tap into this big opportunity of electric vehicles,” said the Australian National University’s Dr Arianto Patunru.

Opportunities for the two countries to work together look set to be on the agenda when Indonesian President Joko Widodo arrives in Sydney this week.

Indonesia is the biggest producer of nickel ore in the world. It has banned exports of that raw material.

High purity nickel is a key component in many electric vehicle batteries.

But Indonesia needs to import other critical minerals that it doesn’t produce locally — like the lithium also used in EV batteries that Australia has in swathes.

“Indonesia has lots and lots of nickel as does Australia, but we don’t have lithium,” Dr Patunru said.

“Indonesia needs to collaborate with other countries … one of which is Australia.”

Indonesian president to visit Sydney 

The Indonesian president will begin a three-day trip to Australia on Monday.

“I am delighted to welcome my friend President Widodo to Australia. This will be our fourth meeting together,” Prime Minister Anthony Albanese said.

“As one of our closest neighbours, Australia is building extensive cooperation with Indonesia on climate, economic development, education and regional security issues.”

Indonesian ministers and business leaders, including Maritime Affairs and Investment Minister Luhut Binsar Pandjaitan, have repeatedly voiced a desire to partner with Australia to import lithium.

“In front of lithium entrepreneurs, I would like to say that Australia is the best candidate and our potential partner to develop the EV battery industry because half of the world’s lithium is in the country of kangaroos,” he wrote in a social media post during a visit to Australia earlier this year.

The first Australia-Indonesia lithium mining and processing venture is already being discussed, according to Arsjad Rasjid from the Indonesian Chamber of Commerce and Industry (KADIN).

“Unfortunately, the negotiations are still in progress and the agreement wouldn’t be able to take place during the presidential visit,” he told the ABC.

But he said KADIN will be signing an agreement with the Western Australia government, which follows on from a memorandum of understanding  signed in February, to explore opportunities for partnerships in critical minerals and the EV industry.

It is expected to run for two years.

“We should capitalise on this opportunity to jointly develop a world-class battery manufacturing factory in Indonesia utilising Australian lithium and investments (with lucrative returns, of course) to realise the potential of Indonesia’s nickel reserves and plentiful workforce,” said Mr Rasjid at the time.

“Together, we can supply the world with our jointly manufactured batteries.”

Possible collaboration opportunities in the EV industry have also been canvassed at previous talks between Indonesian and Australian leaders, including the high-level business meetings in November 2022 in Bali.

“An area where I think there is really an opportunity to build on the [talks] from last year and going into this year is in that space around the [clean] energy transition,” said Jennifer Mathews, national president of the Australia Indonesia Business Council.

“Both countries have got quite deep commitments around reducing emissions, they’re both committed to targets under the Paris Agreement, or there are some bilateral commitments around the green energy transition.

“A real opportunity and a real agenda, particularly for Indonesia, is transitioning its current vehicles into electric.”

China leads EV global supply chain

While Indonesia and Australia could forge new partnerships in the EV industry, any supply chain relationships need to be viewed in a global context, experts say. 

Much of Australia’s lithium goes to China, which has invested huge amounts in clean energy transitions, including in technology needed to process lithium.

“After trial and error and innovation, [China] now has structural advantages compared to all the other countries in lithium processing,” said Marina Zhang, an associate professor at the Australia-China Relations Institute at the University of Technology Sydney.

Dr Zhang, who has been researching China’s EV policies, said 10 years ago China “put a huge bet on electric vehicles”, over clean hydrogen investment options — a gamble which is now paying off.

“China has been spending a lot of money in subsidies for both suppliers and the buyers to develop this market,” Dr Zhang said.

“They’re really leading not just in lithium and the batteries, that’s the main part of EV, but also in the entire supply chain.”

Chinese companies are among the main investors in Indonesia’s nickel industry, but these big players also have business interests in other South-East Asian countries, like Thailand.

“Thailand is one of the global manufacturing hubs for [electric] vehicles,” Dr Zhang said. 

Thailand’s prominence in the industry is not lost on Indonesia officials.

“Indonesia cannot lose to Thailand, we have a big market, don’t let foreign products penetrate our market, we must protect it and even be able to penetrate exports,” said Bahlil Lahadalia, an Indonesia government official overseeing plans for EV battery development locally.

Mr Lahadalia said Indonesia planned to begin battery production in 2024, through technology giant LG.

Dr Zhang said while other countries could implement lithium processing technologies to compete with China, this will take time and money.

“The critical question is, where are the technologies [coming] from?” she said.

“If you start from the beginning, that will take years.”

“And my real concern is when Australia makes a decision [to export lithium], it’s transferring its obligations of environmental protection to countries where environmental protection is not so strictly followed and … even the employment conditions and all those things are more relaxed.”

Blaze at Indonesia nickel smelter kills worker

Indonesia’s efforts to be part of the electric vehicle industry have come with serious costs on the ground, with reports of environmental damage caused by nickel mines and smelters, and worker deaths.

Smelting nickel in Indonesia often relies on energy from coal, and environmentalists have voiced concerns the country’s nickel industry does not meet “environmentally sensitive” standards.

Just last month, a fire at a nickel smelter in Central Sulawesi province left one worker dead and injured six others, a local police spokesperson said.

The incident at the Gunbuster Nickel Industry (GNI), owned by China’s Jiangsu Delong Nickel Industry, came after two workers were killed at the same site in December 2022.

GNI issued a statement in relation to the death last week, and said the victim was given medical treatment but later died.

It said those injured were receiving care at a health facility and an investigation was underway.