Difficult to get (more) Lithium from Australia, (Bigger) Signal Tesla Investment in Indonesia
Difficult to get (more) Lithium from Australia, (Bigger) Signal Tesla Investment in Indonesia
Adelaide 5.37am (Aug 18) / Jakarta 3.07am (Aug 18) / Austin Texas 3.07pm (Aug 17)
5 Hours ago, Core Lithium Ltd (Australia company; HQ in Adelaide) has received a notice from electric-vehicle maker Tesla over a 2022 supply agreement that failed to materialize within the set deadline, the Australian miner said. This failed actually “blessing in disguise” for Indonesia, at the moment 78 years Indonesia’s Independence Day.
If lithium is the limiting factor, Tesla may—at times—prioritize nickel-based and/or non-iron chemistries because they use less lithium per unit of capacity. Tesla wants to minimize lithium use per battery. This may increase the importance of nickel and Indonesia as a result.
From an industrial perspective, Indonesia works very hard to pursue Tesla, BYD, Hyundai, Ford, Volkswagen, Wuling, etc- with a clear intention of promoting homegrown EVs. Harder than India, Thailand, Malaysia, Vietnam, President Jokow Widodo set a clear goal, “Detroit of Southeast Asia.” It's carefully guarding that resource with an export ban on ore: If foreign companies want Indonesia’s raw nickel, they must invest. Back then, the move (export ban) spooked foreign investors, driving major miners like Rio Tinto to exit the country.
But one foreign investor doubled down: Xiang Guangda, founder of the Chinese stainless steel producer. Through a joint venture with a domestic mining company, Mr Xiang invested billions starting in 2013 to build the industrial park in Morowali. China (in aggregate) until today has invested more than US$29 billion into the islands of Sulawesi and North Maluku (East Indonesia) — historically underdeveloped regions that are rich in nickel reserves. By contrast, Canada, the U.S. and Australia combined have invested less than $2 billion. The good, and big challenge for Elon Musk if really wants to be “King of EV” in Southeast Asia. If Elon Musk successfully conquered Southeast Asia, it would be easier to conquer entire Asia, especially to compete with China.
Though Indonesia has long sidestepped entanglements in ideological rivalries, it is increasingly caught in the competition between the U.S. (mostly potential Tesla, also Ford although Ford a long time ago/2016 moving from Indonesia and Japan to other countries) China (BYD, Wuling), and surprisingly South Korea (Hyundai). At stake is control over nickel, a mineral used to make batteries for electric cars. Indonesia has the largest stocks on earth, the Saudi’s of Nickel. A wealth of material for thinking through the most important commodities and issues facing the world right now, EV.
Industrial policy is indeed on the rise, even as most of the econ profession is still ignoring this crucial topic. Indonesian consumers themselves prefer brands that have local factories; it implies easy-to-get spareparts & services, (with example how TOYOTA/ASTRA has been king since the 1960s until today in Indonesia because of very complete spareparts and after-sales services). A challenge for Tesla.
Year ago, President Republic of Indonesia Joko Widodo had lined up a high-profile meeting with Tesla and Space X founder Elon Musk at the private space agency's headquarters, where he was given a private tour.
As Jokowi Widodo praised the tech baron as a "super genius", Mr Musk declared he was "very interested" in the future of Indonesia, a country of 280 million people.
The world's richest man also said the country exuded "positive energy".
"We're going to look, from a Tesla and Space X standpoint, to try and do some partnerships in Indonesia," Mr Musk said, flagging "future collaboration on many fronts".
The electric vehicle industry is in a supply crisis: There is not nearly enough raw nickel, lithium and other metals and minerals to build the batteries for the millions of EVs that the industry envisions selling this decade. Every Western EV and battery manufacturer on the planet is more or less in the same jam—none has sufficient battery raw materials to build all the EVs it would like to.
Tesla is making strides to bring a “quite big” investment to Indonesia in the form of a battery factory, according to statements made by the Minister (General Retired) Luhut Binsar Pandjaitan.
Mr Luhut: according to Elon Musk, Tesla now over-capacity
Mr. Pandjaitan mentioned that he recently had a meeting with Tesla CEO Elon Musk to discuss Indonesia’s economic development and the current condition of Tesla Inc. The main focus of the investment appears to be on the manufacturing of materials for lithium batteries, which are crucial components of electric vehicles (EVs). While it seems that Tesla is not considering a vehicle production facility in Indonesia at this time because Tesla’s plan in Mexico (build Gigafactory) is postponed, plans for a battery materials plant are underway. Meanwhile, Tesla recently filed to implement a US$700 million expansion at Giga Austin.
According to the Elon-Luhut meeting, Elon says that Tesla already built 3 million Teslas but only sold around 1.8 million. Elon tried to make sure Tesla finance was very healthy, not like GM or Ford (was nearing bankruptcy) after oversupply. The specter of a global recession, increased competition from Western and Chinese EV manufacturers, and the brand damage from Elon Musk’s Twitter-related antics do not appear to be a factor in Tesla’s production capacity calculus. Last January, according to Reuters and Bloomberg, (plan of) Gigafactory in Indonesia to target 1 million unit installed capacity. But this is logical if Elon postponed not only (Gigafactory plan) in Indonesia but also in Mexico, when Elon Musk said that Tesla already built 3 million units but sold only around 1.8 million units.
If global economy is better in next year, Tesla may continue plan in Mexico (gigafactory) and even in Indonesia (also gigafactory, not only battery). Indonesia could become Elon Musk's perfect choice for Tesla's manufacturing unit in Asia as the country has the largest nickel reserves, a key element for the battery production.
It's also believed that the billionaire would visit Indonesia in a couple of months. He has been looking for a suitable place in Asia for manufacturing Tesla cars.
The potential investment from Tesla is seen as a significant opportunity for Indonesia, which has been actively seeking to attract foreign investments in the EV industry. Tesla’s interest in the country is particularly exciting due to Indonesia’s abundant reserves of nickel, a key ingredient in lithium-ion batteries. By building a battery factory in Indonesia, Tesla would have access to a local supply of nickel, reducing reliance on imports and potentially driving down production costs.
However, despite the positive discussions, it appears that Tesla may be delaying its investment plans due to overproduction and the current unfavorable global economic conditions, as suggested by Minister Luhut Binsar Pandjaitan. Nonetheless, the interest shown by Tesla in establishing a presence in Indonesia underscores the country’s growing importance in the global EV market and its potential as a manufacturing hub for sustainable transportation.
In addition to the battery factory plans, there are also discussions about bringing Tesla’s Starlink satellite internet service to Eastern Indonesia. The implementation of Starlink would provide numerous benefits, such as improved internet access for healthcare centers in remote areas, enabling real-time health facility data reporting. It would also enhance educational opportunities for students in underserved regions, promoting equal and equitable access to education throughout the country.
The outcome of Tesla’s investment plans in Indonesia remains uncertain, with the company reportedly suspending investments in various countries. However, Indonesia’s rich natural resources, strategic location, and commitment to developing its EV industry make it an appealing prospect for Tesla’s expansion efforts. If the investment moves forward, it will not only strengthen Indonesia’s position in the global EV market but also contribute to Tesla’s mission of accelerating the world’s transition to sustainable energy solutions.
Core Lithium (CXO.AX) has received a notice from electric-vehicle maker Tesla (TSLA.O) over a 2022 supply agreement that failed to materialize within the set deadline, the Australian miner said.
The two companies failed to reach a deal by Oct. 26, 2022, as decided earlier, and now Tesla would take "all available legal remedies" unless the parties mutually resolve the matter, Core lithium said in a presentation on Wednesday.
The notice of a potential legal claim is related to a binding term sheet the companies signed in March last year to negotiate the terms of a supply agreement under which Elon Musk-led Tesla would have received spodumene, a lithium-rich mineral.
The lithium producer was negotiating with Tesla to supply 110,000 tonnes of spodumene from its Finniss project in Australia's Northern Territory.
Rising demand for electric vehicles around the world is encouraging automakers ranging from General Motors (GM.N) to Stellantis (STLAM.MI) to Ford (F.N) to step up efforts to secure raw materials needed for making batteries.
Tesla in 2022 signed a five-year lithium-supply deal with Australia's Liontown Resources (LTR.AX) to buy 100,000 dry metric tonnes (DMT) of the concentrate in the first year starting 2024, increasing to 150,000 DMT per year in subsequent years.
Tesla also continuing a legal hiring spree after the appointment of a new general counsel earlier this year.
Indonesia has the largest reserve of nickel—a critical EV mineral. So, it built its EV battery roadmap on nickel. Yes, not Lithium. Enticing major battery manufacturers like LG and CATL to enter Indonesia is becoming harder as the country’s nickel advantage evaporates.
Elon Musk himself explains “Physics of large cells means the distance from the cooling loop to the center of the cell is high, so it is harder to prevent hotspots. Then, pressure & heat released from a large cell in a weak bag make it impossible to stop the whole pack from burning.There are vast amounts of iron (and lithium) on Earth, but much less nickel. For the global industry to scale battery production to ~10 TWh/year, it needs to be mostly iron. Higher energy density of Nickel only needed for very long range vehicles & aircraft.”
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