Tesla Chooses Indonesia Over Korea... "Advantage in Battery Resource Ownership"

Bloomberg "Preliminary Contract with Indonesia Soon"

[Asia Economy Reporter Yujin Cho] As South Korea vies to attract Tesla's second Asian factory following Shanghai, China, Tesla is nearing a tentative agreement to build a new factory in Indonesia. It is believed that Indonesia's abundant resources, which are key raw materials for electric vehicle batteries, along with relatively low labor costs, have played a significant role in this advantage.

On the 11th (local time), Bloomberg News reported, citing sources, that Tesla is close to a tentative agreement to establish a factory in Indonesia. Insiders familiar with the matter said Tesla's Indonesian factory is expected to have an annual production capacity of up to 1 million vehicles, matching the target set for its global factories. However, since the contract has not yet been finalized, there is a possibility that the deal may fall through.

Tesla's decision to select Indonesia as its second Asian production base appears to be largely influenced by Indonesia's possession of key raw materials related to electric vehicle batteries. One source revealed that the negotiations include plans to establish multiple facilities in Indonesia that will handle various functions such as production and supply chain management.

Indonesian President Joko Widodo has long been dedicated to attracting Tesla's factory. In May last year, Joko met with CEO Elon Musk, and by August of the same year, they signed a nickel supply contract worth $5 billion (approximately 6 trillion KRW). In an interview with Bloomberg, Musk expressed his hope to cooperate beyond merely being a resource supplier and has actively courted Tesla's electric vehicle factory to be established in Indonesia.

Bloomberg explained that if the Indonesian factory is established, it will become Tesla's third factory outside the United States. Currently, Tesla operates gigafactories in Shanghai, China, and near Berlin, Germany, making the new factory the second Asian base.

[Image source=EPA Yonhap News]

While the factory in Indonesia could serve as a gateway to the 675 million consumers in Southeast Asia, Bloomberg pointed out that Southeast Asia is a challenging market for global automakers, as most vehicles sold there are priced below $20,000 (approximately 25 million KRW).

Last month, Bloomberg reported that Tesla is negotiating to build an electric vehicle assembly plant in Mexico. It also noted that Tesla's vehicle sales in the recent third quarter fell short of estimates, and production exceeded customer deliveries by 60,400 units during this period, yet Tesla seems to be pushing forward with plans to increase production capacity.

South Korea is also competing to attract Tesla's second Asian gigafactory. In November last year, President Yoon Suk-yeol requested investment during a video meeting with CEO Elon Musk, who responded that Korea is being considered as one of the top priority investment locations.

At the annual shareholders' meeting in August last year, CEO Musk revealed Tesla's long-term blueprint to build 10 to 12 factories worldwide.