Tesla (TSLA) secures deal for $5 billion worth of nickel in Indonesia, says official

Tesla has reportedly agreed to a deal with the Indonesian government that will secure the automaker about $5 billion worth of nickel, according to a government official.

In 2020, we reported on Tesla allegedly being in talks with the Indonesian government to build a new nickel venture in the country, which has a strong nickel reserve – nickel is one of the main materials used in the production of cathodes for battery cells used in electric vehicles. The move came after CEO Elon Musk pleaded with mining companies to increase their nickel production.

As we detailed in our previous report on Tesla’s interest in Indonesia, the country is one of the world’s biggest nickel producers, but it has also recently put a ban on exporting nickel ore in order to encourage the industry to process it locally.

Indonesia hopes that the measure will encourage companies to invest in manufacturing finished products in the country using their nickel, like batteries.

There has certainly been strong interest from Tesla to establish a relationship with Indonesia.

Earlier this year, Tesla sent a group to Indonesia to talk with the government, and Elon Musk met with President Joko “Jokowi” Widodo.

However, the automaker’s actual intentions in the country have not been clear, and rumors have been all over the place.

In May 2022, Investment Minister Bahlil Lahadalia said that Tesla had “agreed” to “build a battery and electric vehicle plant.” At the time, we noted that the comment should be taken with a grain of salt at this point since the government seems to still be negotiating with Tesla.

Sure enough, three months later, there has been no further announcement on Tesla building an actual factory in the country, but now another government official talks about an actual signed agreement.

Coordinating Minister for Maritime and Investment Affairs Luhut Pandjaitan announced Monday that Tesla has “signed a five-year contract with nickel processing companies operating out of Morowali in Sulawesi island” (via Reuters).

Pandjaitan added:

We are still in constant negotiation with Tesla… but they have started buying two excellent products from Indonesia.

The government official made it sound like it is purely a supply contract – though the country’s regulations would indicate that the nickel would need to be processed in the country before being exported by Tesla to be used in battery manufacturing.

It was recently revealed that Tesla has a strong partnership with Vale to secure nickel, and the Brazilian mining giant is known to have strong operations in Indonesia.