Indonesia wants Tesla to produce vehicles—as well as batteries—in-country. That could be Elon Musk's best wager, and it won't be too difficult. "The electric vehicle, not the battery, is what we want. In an interview with Bloomberg News' Editor-in-Chief John Micklethwait, President Joko Widodo stated, "We want Tesla to build electric cars in Indonesia. A "huge ecosystem of electric cars" is what the nation desires.


Jokowi has the right concept. Companies could contribute to the country's environmental transformation if they were able to manufacture batteries there and utilize the country's abundant nickel resources. Indonesia plans to produce approximately 400,000 electric vehicles (EVs) by 2025 as part of its electrification roadmap, and then several times more after that. It is working to establish a domestic EV supply chain, starting with metal extraction, continuing through smelting, and ending with battery-ready precursor products.


As the race to secure raw materials around the world heats up, companies like Tesla and battery juggernauts Contemporary Amperex Technology in China and LG Energy Solution in South Korea have invested billions of dollars in the nation to set up nickel processing and powerpack projects. It now serves as a promising buffer against problems and shortages in the world's supply chains. Astutely, Jakarta is attempting to take advantage of its situation.


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Not much is being requested by Indonesia. Even though the country's auto market is hardly of any appreciable size, it is expanding, in part because car manufacturing there is not challenging or burdened by the bureaucracy that hinders other emerging markets. Along with other Japanese automakers, the market is dominated by Toyota Motor Corp., the largest automaker in the world. Just last week, the domestic division of China's SAIC-GM-Wuling Automobile Co. unveiled the AirEV, a small electric vehicle produced in the country. Along with Hyundai Motor Co. of South Korea, other Chinese manufacturers have recently declared their intentions to enter the market.


For many years, the country of Southeast Asia has offered manufacturing incentives for automobiles. It has been increasing domestic industry production for decades by using these requirements. Companies may import either fully assembled kits, also known as CKDs, which include parts from abroad that are then put together domestically, or partially assembled kits that include some components from Indonesia. The tariffs, which are not excessive, are based on the amount of local content.


Indonesia has a long history of putting up frustrating administrative barriers in the way of foreign business. During a large portion of his presidency, Jokowi has worked to lower investment barriers, with varying degrees of success. To make it easier for EVs to be produced locally, the government has updated the rules and established policies. Fiscal and non-fiscal incentives, such as tax breaks and deductions on EV-related equipment and supplies, certifications, and preferential financing rates, are now in effect. Overall, the detailed plan makes it easier for foreign players. The promotion of green car purchases among consumers fosters the development of a regional market.


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By utilizing these specifications, Tesla could easily meet Jokowi's challenge by importing CKD kits from China, the world's largest supplier of EV parts, to construct the Model 3 or perhaps a new, more modestly equipped vehicle. It won't be a very expensive venture.


The same thing has happened in China, where Musk used all available subsidies to help Tesla produce millions of electric cars, including loans, cheaper land, and production incentives. By doing this, he satisfied an eager customer base and contributed to improving both China's EV status and that of his own company. He is currently exporting automobiles to other countries. With only a million cars produced annually in Indonesia (as opposed to the 20+ million produced in China), making a big splash in the market is simple.


The ultimate — and more lucrative — goal for Musk could be made possible by that.