Exclusive-President Jokowi "confident" Tesla will invest in Indonesia

2/2 © Reuters. FILE PHOTO: Indonesian President Joko Widodo reads out vows taken by newly appointed ministers and deputy ministers during an inauguration at a Presidential Palace in Jakarta, Indonesia, June 15, 2022. REUTERS/Willy Kurniawan/File Photo 2/2

By Gayatri Suroyo, Kate Lamb and Ananda Teresia

JAKARTA (Reuters) - Indonesian President Joko Widodo is confident Tesla (NASDAQ:TSLA) Inc will finalise a deal to invest in a production facility in his country, having offered the U.S. car maker incentives ranging from tax breaks to a concession to mine nickel.

Southeast Asia's largest economy has been wooing Tesla to invest in battery and car manufacturing since 2020, seeking to leverage its rich reserves of nickel ore, which can be processed for use in EV batteries.

The president, widely known as Jokowi, has held talks with Tesla Chief Executive Elon Musk twice, meeting him in person at his SpaceX facility in Texas last year and a telephone call, to try to secure a deal.

"I said to him that if you invest in Indonesia, I will give the concession of nickel," Jokowi said, referring to Indonesia's offer of a mining concession.

Other incentives include tax breaks and a subsidy scheme on EV purchases to build a market for Tesla in the world's fourth most populous country, he said, adding that his ministers were finalising the subsidies.

The president said he was "confident" Indonesia had the edge over other countries Tesla might be considering for investment because it has the largest nickel reserves and a big domestic market.

Jokowi said it was up to Tesla to take up the offer to mine nickel, underlining that Indonesia is open to investment in the EV battery and electric car supply chain.

"If they want to start from EV battery, it's OK," he added.

Tesla did not immediately respond to a request for comment.

Tesla is looking for an additional manufacturing hub. The company currently manufactures EVs in four locations: Fremont, California; Shanghai; Austin, Texas and outside Berlin. Analysts estimate that Tesla would need to build seven or eight more “gigafactories” to meet Musk’s target of selling 20 million electric vehicles by 2030.

In addition to Indonesia, South Korea, Canada and Mexico have been vying for Tesla to invest in manufacturing. A spokesman for Mexico’s president said on Tuesday that Tesla was considering setting up an assembly plant near a new Mexico City airport.

Analysts have said Mexico could have an edge to win the Tesla investment because of the proximity to its main market in the United States, an established supply base for components and because vehicles built there could qualify for Biden administration consumer tax credits.

POSSIBLE FIRST FOR ASIA

If Tesla were to invest in battery production in Indonesia, it would be its first facility of that kind in Asia. Last month, the company announced a $3.6-billion investment to expand battery production at its Nevada factory.

Jokowi banned the export of nickel ore in 2020 to encourage investors to build a vertically integrated supply chain for batteries and EV, using the metal as a raw material.

The ban has brought in big investments in nickel smelting, mostly from China, but has also been challenged at the World Trade Organization by the European Union, which says the ban was unfairly harming its stainless steel industry.

The WTO last year ruled in the EU's favour but Indonesia is appealing.

Indonesia has also seen rising interest in investment in EV or battery production, with South Korea's Hyundai Motor Co and LG Energy Solution already building EV and battery plants.

Indonesian officials last year said Tesla has signed contracts worth about $5 billion to procure materials for their batteries from nickel processing companies.