Indonesia’s Battery Industrial Strategy

This commentary is part of Energy Rewired, a project from the CSIS Energy Security and Climate Change Program studying the industrial strategies of major economies for the energy transition. The project examines countries’ big bets on emerging energy technologies and how these will rewire the world’s energy map.

Key Points

  • Indonesia wants to develop an integrated electric vehicle (EV) supply chain and become an EV battery producer and exporter. Southeast Asia’s largest economy has the ambitious goal to make batteries with a capacity of 140 gigawatt hours (GWh) in 2030, which is nearly as much as global EV battery production in 2020.

  • The country’s ambitions are motivated from upstream and downstream the supply chain: the world’s biggest nickel producer wants to capitalize on its mineral resources but also aims to reduce emissions by creating a domestic EV market.

  • Upstream the supply chain, Indonesia leverages its nickel reserves and applies restrictive measures to attract foreign investment in nickel processing. Midstream and downstream, Southeast Asia’s largest car market offers incentives for EV battery (component) producers, EV manufacturers, and EV buyers.

  • South Korean investments are currently building the country’s first EV battery plant, scheduled to start production in 2024, as well as its first EV plant. Nickel processing for use in batteries started in 2021, with more projects in the pipeline, mainly due to Chinese investments.

  • Whether or not Indonesia can reach its goal to produce 140 GWh in 2030 will depend on attracting substantial foreign investment over the next few years. The government will have to further address challenges to conducting business in Indonesia as well as environmental, social, and corporate governance (ESG) concerns related to nickel mining and processing.



Indonesia wants to develop an integrated domestic EV supply chain, from mining and processing battery metals to the production of precursor cathode active materials, battery cells, battery packs, EVs, and eventually battery recycling. The government has the ambitious goal to produce EV batteries with a total capacity of 140 GWh per year by 2030—from zero EV battery production today. One-third of the future production is planned to be exported, while the remainder should be used for the domestic EV industry, which is just starting to be developed.

For context, Indonesia’s goal to manufacture 140 GWh in 2030 is in the same order of magnitude as the total global EV battery production in 2020 (160 GWh); however, as demand is rising rapidly, 140 GWh will only be about 4 to 9 percent of the global demand in 2030 (as forecasted by the International Energy Agency, depending on the applied scenario).

Indonesia’s goal to become an EV battery producer and exporter is motivated from upstream and downstream the supply chain.

Upstream the battery supply chain, the world’s biggest nickel producer wants to capitalize on its natural resources. Attracting foreign investments in nickel processing means adding value to the mined nickel ore compared to just exporting it. Nickel and cobalt, which is a by-product of nickel processing for batteries in Indonesia, are key ingredients for the production of most EV batteries today.

Downstream the battery supply chain, Southeast Asia’s biggest and growing car market aims not only to attract foreign investment in the EV industry but also to develop a domestic EV market to reduce greenhouse gas (GHG) emissions. Presidential Regulation No. 55/2019 mandates the development of a domestic EV industry as a national priority to “increase the energy efficiency . . . in the transportation sector” in the context of Indonesia’s commitment to reduce GHG emissions.

Indonesia has committed to reduce 29 percent of its GHG emissions against the business as usual (BAU) scenario by 2030. Subject to availability of international support for finance, technology transfer, and development and capacity, Indonesia states it could reduce its emissions up to 41 percent by 2030. The government has set a target of having 13 million electric motorcycles and 2.2 million electric cars on the roads by 2030 (like in several middle-income countries in Asia, there are more motorcycles (112 million) than cars (15 million) in Indonesia). The extent to which EV adoption will not only support cleaner air in cities, but really reduce emissions, will of course depend on how the electricity fueling the EVs is produced; the power mix of the world’s second-largest coal producer is still emission intensive, with a coal share of about 60 percent.


Indonesia applies a carrot-and-stick approach to developing an end-to-end EV supply chain and to becoming an EV battery producer and exporter: upstream (mining and processing), the country leverages its nickel reserves and applies restrictive measures, while midstream (EV battery production) and downstream (EV production and EV adoption), it offers incentives.

Upstream: If You Want Indonesia’s Nickel, You Must Process It There

On the upstream end of the supply chain, Indonesia leverages its abundant nickel reserves and applies restrictive measures, guided by its 2009 Mineral and Coal Mining Law (Law No. 4/2009). Another commentary in this series offers a closer look at these measures and Indonesia’s nickel strategy.

The country’s most radical regulation is its export ban on unprocessed nickel ore that was imposed in 2014, relaxed in 2017, and reimposed in 2020. On the backdrop of a looming nickel supply shortage, the ban successfully persuaded foreign companies to set up processing plants in Indonesia, although nickel production for the battery supply chain from Indonesia’s laterite deposits has inherent risks and challenges, including ESG issues. Most companies investing in nickel processing in Indonesia are from China, the world’s biggest battery producer and second-largest EV market (Europe overtook long-term leader China in 2020).

There are several nickel processing projects in the pipeline in Indonesia, and they will be key to future global nickel supply for batteries, at least in the near term. The first three plants started (trial) production in 2021. But it is unclear to what extent the output of the mostly Chinese-invested nickel processing projects will be available for the domestic supply chain, as they might have fixed delivery contracts with Chinese firms.

This might be a reason why the country is considering levying an export tax on nickel products with less than 70 percent nickel content. Such an export tax would target, inter alia, an intermediate product called mixed hydroxide precipitate (MHP, typically 34 to 55 percent nickel content), which is the output of high-pressure acid leaching (HPAL) plants; most of Indonesia’s new or projected processing plants for the battery supply chain are HPAL plants and produce MHP. To avoid the considered tax, companies would have to climb further up the supply chain in Indonesia. The Chinese-Indonesian joint venture that built the country’s first commissioned HPAL plant, for instance, already has plans to produce precursor cathode active material in Indonesia.

Midstream and Downstream: Incentives for EV Battery (Component) Producers, EV Manufacturers, and EV Buyers

Midstream and downstream the supply chain, Indonesia offers incentives. Presidential Regulation No. 55/2019 serves as overarching guidance for developing policies to accelerate the domestic EV industry. It identifies responsibilities and suggests incentives.

  • The Ministry of Industry can determine technical specifications for EVs (Article 2).

  • Despite spelling out local content requirements that require EV manufacturers to use domestically manufactured goods (increasing to 80 percent by 2030) and that are quite common for various industries in Indonesia, the regulation still allows the import of components such as battery cells for a certain period after setting up an EV manufacturing plant (Articles 8, 11, 12, and 13).

  • The government can limit the use of internal combustion engine cars to accelerate EV adoption (Article 16).

  • The central government and regional governments are to provide fiscal and non-fiscal incentives, such as for companies in the EV (component) industry, in battery recycling or EV charging, and for research institutions (Article 17). These can include tax exemptions, import duty exemptions, reduced parking fees, or reduced electricity tariffs at charging stations (Article 19).

  • The Ministry of Energy and Mineral Resources is to regulate the electricity tariffs for charging EVs (Article 27).

  • End-of-life batteries must be recycled (Article 32).

  • The Coordinating Ministry on Maritime and Investment Affairs heads a
    committee of various ministries that is charged with implementing the regulation (Article 34).

Several central and regional government regulations promoting the EV industry have already been adopted based on Presidential Regulation No. 55/2019, but stronger policies are needed to convert the regulation’s strategic guidance into real action.

For the moment, Indonesia does not have domestic EV battery cell or EV production, and it is lagging in EV adoption compared to the leading markets in Europe, China, and the United States. But the country’s first domestically produced EV battery cells and EVs are already on the horizon: South Korea’s carmaker Hyundai and battery giant LG Energy Solution (LGES, which supplies batteries to companies such as General Motors, Tesla, and Volkswagen) are currently building Indonesia’s first EV battery cell plant, with a planned annual production capacity of 10 GWh. In this gigafactory, LGES will produce its new nickel-rich nickel-cobalt-manganese-aluminum (NCMA) battery cells, which contain 90 percent nickel in their cathodes. The plant is expected to start production in 2024. The battery cells will be used by Hyundai and its affiliate, Kia. According to the government, LGES’s investment in the $1.1 billion plant is part of a $9.8 billion EV battery investment deal.

The government states further that China’s battery giant CATL (which supplies batteries to companies such as Tesla, BMW, and Volkswagen) plans to invest $5 billion in Indonesia. CATL’s recycling arm Brunp has already invested in a nickel processing project led by Chinese battery material producer GEM. However, at this point, it is unclear from media reports how binding the agreements with LGES and CATL are.

There have also been rumors about an investment by EV market leader Tesla. But the U.S. company seems to be reluctant, presumably due to ESG issues associated with nickel production and the challenging business environment in Indonesia, including the requirement to partner with the country’s state-owned companies (the World Bank’s Ease of Doing Business index ranks Indonesia 73rd among 190 economies).

Another step up the EV supply chain leads to Indonesia’s first EV manufacturing plant, also a project of Hyundai and currently under construction. The first EV “made in Indonesia” is scheduled to be produced in 2022. According to the government, further car manufacturers, such as Japan’s Toyota, Mitsubishi, Honda, and Suzuki, also have plans to produce EVs in Indonesia.

It is worth mentioning that EV battery chemistry development could become a risk for Indonesia’s plans to develop an integrated EV industry. There has been a revival of the LFP battery, which is cheaper than nickel-rich batteries and does not contain nickel or cobalt. An EV buyer in a middle-income country such as Indonesia might favor more affordable EVs with LFP batteries over cars with high-performance nickel-rich batteries. This means that future EV manufacturers in Indonesia could prefer to use LFP batteries made in China over nickel-rich batteries made in Indonesia, which could become an additional challenge for implementing local content requirements.

Indonesia Wants Its State-Owned Companies to Be Involved

In March 2021, the Indonesia Battery Corporation (IBC) was founded. The IBC consists of four state-owned companies in the mining and energy sector: mining industry holding company MIND ID, nickel miner Aneka Tambang (Antam), electric utility PLN, and oil and gas company Pertamina.

Foreign EV battery companies investing in Indonesia are required to partner with IBC, although none of the companies forming IBC have experience in manufacturing EV batteries. This measure is likely aimed at technology transfer and job creation. However, IBC’s exact role in these partnerships remains foggy from publicly available information. For example, the international trade press reports that Indonesia’s first battery plant under construction is a 50:50 joint venture of Hyundai and LGES, while an official Indonesian government website says that the factory is owned by IBC and LGES.


LGES and Hyundai’s EV battery plant is under construction in proximity to Hyundai’s EV plant east of the current capital Jakarta; established transportation networks, including airports and ports, have attracted several large-scale automotive industrial complexes to this area. Nickel mining and processing takes place about 1,000 to 1,500 miles away in nickel-rich Sulawesi and North Maluku Islands.

Isabelle Huber is a visiting fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

This commentary is made possible by support from the Hewlett Foundation.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Isabelle Huber

Isabelle Huber

Former Visiting Fellow, Energy Security and Climate Change Program