Development of a Battery Manufacturing Industry Roadmap for Indonesia


  • SOLICITATION NUMBER: 0002008482
  • INSTITUTION:  IFC
  • ASSIGNMENT LOCATION: Indonesia
  • ISSUE DATE AND TIME: Apr 19,2024 12:56
  • CLOSING DATE AND TIME: Apr 29,2024 23:59

Indonesia is aiming to establish a comprehensive domestic electric vehicle (EV) supply chain; encompassing everything 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's ambitious target is to achieve an annual production capacity of 140 GWh for EV batteries by 2030; starting from zero production today. About one-third of this future production is earmarked for export; while the remaining portion is intended for the emerging domestic EV industry. Indonesia's 2030 goal is comparable to the total global EV battery production in 2020 (160 GWh). However; due to rapidly increasing demand; this output is estimated to constitute only around 4 to 9 percent of the projected global demand in 2030; as forecasted by the International Energy Agency; depending on the scenario applied.Indonesia's drive to become an EV battery producer and exporter is motivated by both upstream and downstream considerations within the supply chain. Upstream; as the world's largest nickel producer; the country aims to leverage its abundant natural resources. Encouraging foreign investments in nickel processing allows for value addition to mined nickel ore; as opposed to merely exporting it. Nickel and cobalt; crucial ingredients for most current EV batteries; are by-products of nickel processing for batteries in Indonesia. Downstream in the battery supply chain; Southeast Asia's largest and expanding car market seeks not only to attract foreign investment in the EV industry but also to cultivate a domestic EV market to mitigate greenhouse gas (GHG) emissions. Presidential Regulation No. 55/2019 emphasizes the development of a domestic EV industry as a national priority to enhance energy efficiency in the transportation sector; aligning with Indonesia's commitment to reduce GHG emissions.Converting Indonesia’s rich natural resource endowment into an effective battery manufacturing industry has been hampered by an absence of a strategic policy to grow investment opportunities in the sector. Thus far; a number of investments have been announced upstream and downstream; but midstream investments remain lacking. The objective of this cooperation is therefore to develop a policy and roadmap for the Government of Indonesia to implement to boost investment in battery manufacturing; by assessing the potential development of the sector/value chain; the associated job creation; and the ensuing growth together with a series of actions that would need to sequentially take place for the creation of a competitive battery manufacturing industry. The policy will build on global best practices and lessons learned from countries with experience in the development of battery industry value chains (for example; China; Korea; Chile; the United States; with a focus on Morocco from its successful experience in growingits auto industry ecosystem) and explore typical pre-conditions for investment.

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