Indonesia and Australia have solidified their partnership for lithium trade, fueling hopes for a greener and more sustainable future. The move is made to capitalize on the global demand for lithium surging due to its vital role in electric vehicle batteries and energy storage solutions.
This collaborative effort between the two nations holds immense economic growth and environmental preservation potential. As businesses eagerly explore avenues to participate in this market, understanding how to invest in lithium becomes a key point for those seeking to thrive in the growing lithium industry.
Indonesia’s ambition to expand the EV industry
Indonesia has set an ambitious target for electric vehicle (EV) adoption. The world’s richest nickel reserves aim to have 400,000 electric four-wheelers and 1.8 million battery-powered vehicles by 2025. The growth of EVs in Indonesia has been evident in recent years.
The growth is supported by the increasing number of two-wheeled EV units, from 1,947 in 2020 to 26,000 units by the end of 2022. While the four-wheeled EVs experienced an even more significant increase, with a 33-fold rise from 230 units in 2020 to 7,600 units in 2022.
A joint study by AC Ventures and e-mobility association AEML indicates that Indonesia’s electric vehicle ecosystems will gain a better market. The report highlights that the automotive research and development (R&D) and manufacturing sectors offer the most extensive total available market, presenting an opportunity of USD 12.5 billion to USD 15 billion by 2030.
Given the positive outlook and ambitious target for EV development, the government also considers securing the critical minerals for EV battery production as the most important component for EVs.
Read more: The Investment Opportunity for an Electric Vehicle Ecosystem in Indonesia
Lithium is one of the critical minerals for EV batteries
Most of EV currently use lithium-ion and lithium-polymer batteries due to their relatively higher energy density in comparison to their weight.
Lithium is one of the critical minerals for EV batteries. Lithium-ion batteries facilitate the movement of lithium ions from the anode to the cathode, generating power. Besides lithium, other critical minerals for EV batteries include nickel, manganese, cobalt, graphite, and steel.
Indonesia-Australia trade partnership for lithium
The Indonesian government is planning to secure an additional 60,000 tonnes of lithium per year from Australia to support the development of a comprehensive EV industry in Indonesia.
This additional quota would double the previous agreement between the two countries. Indonesia is expected to get 120,000 tonnes of lithium from Australia annually.
Indonesia holds the world’s largest nickel reserves, a significant advantage as the country aims to become a global EV production hub. However, it lacks domestic lithium supplies, which is equally crucial for EV batteries.
On the other hand, Australia possesses 53% of the world’s lithium output, making it a valuable source for Indonesia’s lithium needs.
This trade partnership is expected to meet the increasing demand for EV batteries in Indonesia. The country’s annual battery demand is projected to reach 20.1 gigawatt-hour (GWh) by 2030 and rise to 59.1 GWh by 2035.
Challenges to value chain trade
Albeit the partnerships between Indonesia and Australia present opportunities in establishing a secure value chain for EV battery development, they also face potential challenges, as follows:
1. Environmental
The extraction, refining of raw materials, and cell production in the battery industry can cause significant environmental damage, including land degradation, loss of biodiversity, hazardous waste generation, and water, soil, and air contamination.
2. Social
Without proper management, operations within the battery value chain can negatively impact local communities by violating labor laws, employing child and forced labor, and infringing on indigenous rights, particularly in emerging markets.
3. Governance
Companies in the battery industry may face conflicts of interest or interact with poorly managed organizations.
4. Political
With the upcoming Indonesia general election in 2024, there is no guarantee that the new leadership will continue striving for trade partnerships for Australia’s lithium.
Business opportunities for the EV industry
[elementor-template id=”229205″]Despite the potential challenges, Indonesia’s ambition to develop the EV industry also presents several new business opportunities, as highlighted below:
1. Manufacturing
Several manufacturing categories will grow as EVs gain momentum, such as EV manufacturing, EV battery manufacturing, and electric vehicle supply equipment manufacturing.
2. Infrastructure
Supporting infrastructure, such as charging stations, is highly required for EV-wide adoption in the country.
Read also: Guide to Invest in Lombok Property for Australians
3. Software development
Several supporting software is expected to be developed to ensure the EV is safe, secure, intelligent, and connected.
4. Training and skill development
The growing EV industry also requires a more skilled individual to keep pace with the technological advancement in this sector.
5. Dealership and franchise
The rise in electric vehicle production creates new possibilities for dealerships and franchise opportunities.
6. Maintenance and reparation
Maintaining an EV differs from keeping an internal combustion engine (ICE) vehicle. EV maintenance requires specialized expertise due to the different powertrain components used in EVs.
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Conclusion
The Indonesia EV industry is gaining momentum following the trade partnership with Australia for lithium supply. This collaboration is set to fulfill Indonesia’s demand for lithium and aid in developing EV batteries, benefiting from Australia’s vast lithium reserves.
The growth of the EV industry in Indonesia creates various business and investment prospects. Companies aiming to capitalize on the expanding EV industry’s potential can seek assistance from InCorp Indonesia, especially for company registration and business licensing.
InCorp Indonesia has a decade of experience and a vast network, offering a wide range of market entry and corporate services to domestic and international clients looking to expand and operate in Indonesia and the broader Southeast Asia region.
Daris Salam
COO Indonesia at InCorp Indonesia
With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.