Elon Musk can now bid even better

Elon Musk Can Make an Even Smarter Bid Now

Indonesia wants Tesla to make cars and batteries locally. This may be Elon Musk’s smartest bet, and it won’t be that hard. “What we want is electric cars, not batteries. For Tesla, we want them to build electric cars in Indonesia,” President Joko Widodo said in an interview with Bloomberg News editor-in-chief John Micklethwaite in the country. Wants a “huge ecosystem of electric cars”.

Jokowi got the right idea. If companies can make batteries there and use the country’s vast nickel resources, they too can be part of the solution that helps make the country green. As part of its electrification roadmap, Indonesia wants to make around 400,000 EVs by 2025 and multiply it after that. It is working to build an EV supply chain domestically – from metal extraction to smelting and battery-ready precursor products.

In recent months, battery giants such as Tesla and China’s contemporary Amperex Technology and South Korea’s LG Energy Solutions have poured billions of dollars into the country to set up nickel processing and powerpack projects as the race to grab the raw material heats up globally. it occurs. It has effectively become a promising hedge against global supply chain crises and shortages. Jakarta, cleverly enough, now wants to take advantage of its position.

Indonesia is not asking for much. While the country’s auto market is hardly of any meaningful size, it is growing, because making cars there is not difficult or weighed down by the red tape that holds other emerging markets behind. The world’s largest automaker, Toyota Motor Corp., along with other Japanese manufacturers, dominate the market. China’s SAIC-GM-Wuling Automobile Co. The U.S. domestic unit just last week launched a locally manufactured small electric vehicle – the AirEV. Other Chinese manufacturers have also made their way into the market recently, while South Korea’s Hyundai Motor Co. Said that it is also working on locally assembled EVs.

The Southeast Asian nation has had a manufacturing incentive for cars for many years. It has used these requirements for decades to boost the production of the domestic industry. Companies can bring in complete knock down kits, or CKDs, meaning parts from overseas that are then assembled domestically, or incomplete kits that contain few Indonesian components. The percentage of local content determines the tariffs, which are not prohibitive.

Indonesia has long been notorious for removing bureaucratic barriers to foreign trade. Jokowi has spent most of his presidency trying to lower investment barriers, with mixed results. The government has changed the rules and put in place policies for EVs, which have made it easier for them to be produced locally. Fiscal and non-fiscal incentives such as tax deductions and holidays on EV related materials and machinery, certification and preferential financing rates now exist. All told, the comprehensive plan paves the way for overseas players. Consumers are being encouraged to buy green cars, thereby helping to create a local market.

Taking advantage of these requirements, Tesla could easily meet Jokowi’s challenge by bringing CKD kits from China — the supplier of EV parts to the world — to build the Model 3, or perhaps a newer, smaller and more basic vehicle. It won’t be an expensive proposition.

It has also been done in China, where Musk took advantage of all the subsidies, including loans, cheaper land and production incentives, to help Tesla build millions of electric vehicles. In doing so, he helped elevate both China’s EV status and that of his company, and cater to an eager consumer base. He is now exporting cars to the rest of the world. Hitting the Indonesian market, barely a million cars a year (compared to the 20-some million built in China) can easily be completed.

It could pave the way for making Musk’s battery, which is the ultimate — and more lucrative — endgame.

© 2022 Bloomberg LP


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