Indonesia Seeks Australia’s Help in Becoming a Global EV and Battery Supplier
Australia and Indonesia are strengthening their economic collaboration, leveraging their respective strengths in the clean energy transition. Indonesia is emerging as a manufacturer of electric vehicles and their accompanying batteries, while Australia possesses the necessary lithium reserves to support Indonesia’s endeavors in this field.
During the visit of Indonesian President Joko “Jokowi” Widodo and Prime Minister Anthony Albanese, both leaders expressed their commitment to enhanced cooperation in the energy transition. In their joint communique on Tuesday, particular emphasis was placed on Indonesia’s endeavors to advance its electric vehicle manufacturing sector. Widodo aims to collaborate with Australia to fulfill Indonesia’s aspiration of becoming a prominent global hub for electric vehicle and battery production.
Indonesia’s goals
Indonesia has set ambitious goals aligned with its commitment to the Paris Agreement. By 2025, the country aims to have at least 20% of its vehicle production composed of electric vehicles, amounting to approximately 400,000 cars.
To facilitate this transition, the Indonesian government has implemented initiatives such as the Low-Cost Green Car incentives and Low-Carbon-Emission Vehicle regulations.
Currently, the majority of vehicles manufactured in Indonesia involve collaborations with foreign automakers. To produce electric vehicles, Indonesia has established joint ventures with Hyundai from Korea and SGMW from China.
To support its vision, the Indonesian government envisions the Indonesia Battery Corporation (IBC) becoming a prominent hub for electric vehicle battery manufacturing. This strategy capitalizes on Indonesia’s abundant nickel reserves. However, the country faces challenges due to the scarcity of other necessary components for battery production, particularly lithium.
Indonesia is aiming to become one of the top five global producers of electric vehicle batteries by 2040. To achieve this goal, securing access to essential minerals, including lithium, is crucial. Currently, Australia is the most attractive supplier of lithium for Indonesia due to its proximity. Australian mines are responsible for approximately half of the world’s lithium production, making it a significant player in the global market.
Australia’s Geographical Advantage and Strategic Opportunities in Lithium Export
While Chile and China are also important lithium suppliers (24% and 16% respectively), Australia’s geographical proximity gives it an advantage. Geopolitical changes, such as Chile’s plans to nationalize its lithium industry, and disruptions in global supply chains, including the Russia-Ukraine conflict and tensions between China and the US, further highlight the benefits of Australia exporting lithium to Indonesia.
Although Australia is the largest producer of spodumene, a mineral rich in lithium, it has limited capacity for refining spodumene into lithium hydroxide, which is crucial for lithium-based batteries. Therefore, leveraging this resource as part of the global supply chain by collaborating with the battery and car industries in Indonesia and other countries is a logical step.
Australia’s specialization in high value-to-weight components, such as those used in aircraft, vehicles, and medical equipment, helps overcome the challenges posed by its geographical distance from major markets. Exporting raw materials, including lithium, and importing the derivatives for producing high-value goods within Australia is a more cost-effective approach.
Agreement on lithium achieve
An agreement on lithium between Australia and Indonesia would have several benefits. In February 2023, the Western Australian government and the Indonesian Chamber of Commerce and Industry (KADIN) signed a memorandum of understanding (MOU) to explore partnership opportunities, particularly in the supply of critical minerals for the battery industry.
Both countries are expected to sign an MOU to accelerate cooperation in the global battery and electric vehicle sector, as stated in the joint communique. It is crucial to view this cooperation as a broader endeavor, as an electric vehicle battery requires various components sourced from different countries, and the integration of the battery industry with the automotive industry is necessary to cater to global markets.
The potential joint ventures between the two countries may extend to mineral processing. In Indonesia, most smelters are powered by coal, so collaboration on the energy transition should include a shift towards clean energy sources like wind, hydro, and solar power. As both countries embark on the energy transition to address climate change challenges, they should exploit the complementary aspects of their economies for mutual benefit.
Read the original article on Tech Xplore.
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