Is Indonesia set to dominate the EV world? Inside the $1.2bn CATL partnership

Indonesia has officially launched a $1.2 billion joint venture with China’s battery manufacturing giant, Contemporary Amperex Technology Co. Ltd. (CATL), aiming to solidify its status as a major player in the global electric vehicle (EV) industry. The partnership, announced in mid-October 2024, involves Indonesia’s state-owned entity, Indonesia Battery Corporation (IBC), collaborating with CATL to establish a large-scale battery production facility in Karawang, West Java.

A Strategic Move Towards Becoming an EV Powerhouse

The new venture is part of Indonesia’s broader ambition to become a hub for EV production and a critical supplier of battery materials worldwide. The Indonesian government has been working aggressively to enhance its nickel processing capabilities since banning the export of unrefined nickel in 2020. This measure aimed to attract foreign investment into its domestic battery production and to establish a sustainable EV supply chain, boosting the nation’s position as the largest nickel producer globally.

The planned facility in Karawang is expected to achieve an annual production capacity of 15 gigawatt-hours (GWh), with its products supporting the fast-growing EV markets across Asia, Europe, and North America. This venture reflects Indonesia’s policy shift to develop its downstream industry for added value, particularly in the electric vehicle and battery sectors, which have attracted numerous international companies such as Hyundai and LG Energy Solution.

Scaling Up Battery Production with Key Partnerships

Indonesia’s partnership with CATL comes on the back of other substantial investments in the country’s EV battery sector. CATL is not new to the Indonesian market; it has already committed to various projects, including a multi-billion dollar complex that integrates mining and battery production. This expansion aligns with China’s broader strategy of securing its supply chain for essential minerals like nickel, which is pivotal for lithium-ion battery production.

The venture in Karawang is strategically positioned to take advantage of Indonesia’s vast nickel resources. The country, accounting for nearly 37% of the global nickel supply, has seen a surge in foreign investments aimed at nickel processing plants and battery production. By partnering with Indonesia, CATL secures a crucial link in its global supply chain while Indonesia benefits from technology transfer and infrastructure development.

Environmental and Economic Considerations

Despite the economic benefits, the rapid expansion of Indonesia’s nickel and battery industry has drawn criticism over environmental concerns. Past practices, such as deep-sea tailings disposal, have led to controversy, and the government has banned this practice. However, issues persist regarding energy-intensive processing methods that challenge the environmental sustainability of such projects. CATL and IBC have expressed their commitment to implementing more sustainable and eco-friendly technologies as they scale operations to meet global EV demand.

Boosting Indonesia’s Economy and Job Market

This joint venture is expected to generate thousands of jobs, not only in the production facility but across the entire supply chain, including mining, processing, and logistics. Furthermore, the influx of foreign capital and expertise is projected to enhance Indonesia’s industrial capabilities, making it a regional leader in EV battery manufacturing.

Indonesian officials have highlighted that such collaborations are vital for achieving the nation’s goal of reducing carbon emissions and increasing the local content of EVs to boost exports. The partnership is also likely to make Indonesia a focal point for automotive giants seeking reliable battery sources outside of China, a crucial move given the increasing geopolitical and supply chain pressures worldwide.