Will Indonesia finally win Elon Musk's help to realise its EV dreams?

When Indonesian President Joko Widodo visited the US last week, it wasn't his talks with US President Joe Biden that generated the most buzz back home, but his long-anticipated meeting with the world's wealthiest man and electric vehicle (EV) titan Elon Musk.

Jakarta has for years been trying to woo Musk, the CEO of electric carmaker Tesla and aerospace company SpaceX, to invest in the country since it set its sights on developing the region's biggest EV industry. Its hopes were further buoyed when the billionaire was last year said to be keen to build a launch site on one of Indonesia's remote islands.

"[This meeting] is a follow-up of my instruction to the coordinating minister of investment affairs to talk to Elon about investment, technology and innovation," said Widodo at SpaceX's Stargate building in Texas.

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Musk said he would try to visit Indonesia in November, around the time it would be hosting the G20 Summit on resort island Bali. He noted that Indonesia, with its steady economic growth and Southeast Asia's largest population of 270 million people, had "tremendous potential" and he would "look closely from the Tesla and SpaceX standpoint to try to do some partnerships".

Any deal with Musk would propel Indonesia into the global EV industry's supply chain, which is expected to continue growing as carmakers race to cut carbon emissions.

The country also stands to gain from its status as the world's largest producer of nickel, a key material in EV batteries. With 21 million metric tonnes of nickel in store, Indonesia has more reserves of the metal than next-largest producers Australia and Brazil combined.

But to win the growing regional battle for Tesla's favour, Indonesia has to raise its environmental, social, and corporate governance (ESG) profile and establish incentives including tax breaks - particularly as neighbouring Malaysia seeks to build its own EV sector, analysts say.

Tesla is said to have been cool towards Jakarta's invitation for it to invest in its EVs and to build a rocket launch site, as the country had so far fallen short of its operational standards for sustainability, among other reasons.

"In 2021, Indonesia could not offer that to Tesla. Tesla wanted its battery resourcing from Indonesia to meet its ESG standards - which are environmentally friendly, not sourced from illegal mining, and employ a transparent supply chain," says Andry Satrio Nugroho, a researcher for industry, trade, and investment at the Institute for Development of Economics and Finance (Indef).

"Both parties this time might have agreed on that front," the Jakarta-based analyst said.

Representatives from Tesla were reportedly in Indonesia last week to visit the nickel production hub in Morowali, Central Sulawesi, regarding a potential battery-related investment.

A person familiar with the matter told This Week in Asia, however, that Tesla's battery resourcing director was speaking with local consultants to assess how clean Indonesian nickels really were.

The race for investments from Musk comes as the billionaire himself is eyeing new places to expand his EV empire.

Last year, Tesla was looking at India as a potential new manufacturing hub, but doubts have since arisen on whether it will set up shop there as the company failed to lobby New Delhi to lower import taxes for its cars, according to Reuters.

In Southeast Asia, Malaysian Prime Minister Ismail Sabri Yaakob last week said he had "suggested to Tesla to invest in Malaysia in producing electric cars".

Andry from Indef said Indonesia's large population would give it a leg up on the regional competition to get Musk's investments.

"But we cannot undermine Malaysia, especially if we talk about the automotive industry," he said. "When it comes to car parts, they have been connected to the global value chain. Many Japanese [Original Equipment Manufacturers] produce their parts in Malaysia."

To attract Musk, Jakarta therefore should also offer tax holidays, land concessions, and hassle-free permits to build infrastructure to support Tesla's manufacturing activities, said Yannes Martinus Pasaribu, an car industry-focused lecturer from Bandung Institute of Technology.

Meanwhile as Indonesia's pursuit of Tesla continues, it has scored multibillion-dollar investments from several battery and carmakers in a show of commitment to its EV ambitions over the past year.

Battery maker LG Energy Solution earlier this year poured in about US$9 billion to set up a thorough supply chain in Indonesia. It is also building a battery cell plant with partners including Hyundai Motor, Kia, and Hyundai Mobis in Karawang, southeast of Jakarta, aiming to start production by the first half of 2024.

China's Contemporary Amperex Technology Co, the world's largest EV battery maker, is pumping nearly US$6 billion in a project together with Indonesian state-owned mining firms PT Aneka Tambang Tbk and PT Industri Baterai Indonesia, with an eye to start production by 2024.

Last month, China's Zhejiang Huayou Cobalt Co and PT Vale Indonesia Tbk also announced a tie-up in a new nickel project.

Cars aside, Andry said it appeared more likely that Indonesia, the world's largest single archipelago, would better appeal to Musk as a potential site for a SpaceX launching pad than a production hub for Tesla.

"SpaceX's aircraft have an autonomous landing feature, and typically they test it on water," Andry said. "I think Musk will be happy here considering the fact that Indonesia is an archipelago."

This article originally appeared on the South China Morning Post (SCMP).

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