Indonesian leaders woo Elon Musk to build rocket facility and battery plant after Starlink launch

The launch by billionaire Elon Musk of Starlink’s satellite internet services in Indonesia has spurred top politicians to woo the Tesla and SpaceX CEO to build an electric vehicle battery plant and a rocket launch pad in Southeast Asia’s largest economy.

On Sunday (May 19), Musk touched down on the resort island of Bali to launch Starlink, with the technology expected to transform health services in Indonesia’s remote areas.

The world’s second-richest man was greeted at the airport by Indonesian Coordinating Minister of Investment Luhut Pandjaitan, who urged Musk to invest further in the country through Tesla or SpaceX during their car ride from the airport.

“I also offered him a launch pad [for SpaceX’s rockets] in [the island of] Biak. I told him that Biak was very suitable because it was on the equator so [launching] costs could be cheaper,” Luhut told reporters on Sunday.

On Monday (May 20), Musk met outgoing Indonesian President Joko Widodo on the sideline of the World Water Forum, as well as with President-elect Prabowo Subianto. Widodo has long sought to attract Musk to invest in Indonesia.

Luhut told reporters on Monday: “We made an offer, is it possible to build an EV battery plant here, precursor cathode? And he [Musk] will consider it.”

He added that Widodo had also asked Musk to consider setting up the rocket launch pad in Biak or a centre for artificial intelligence.

On Sunday, Musk said that “it’s very likely” his companies would make more investments in Indonesia without elaborating, adding that his focus was to expand Starlink in the country for now.

“We are focusing this event on Starlink and the benefits that connectivity brings to remote islands,” he said. “I think it’s really to emphasise the importance of internet connectivity, how much of that can be a lifesaver.”

Musk’s visit to Indonesia came nearly a month after his surprise visit to China. He had postponed a visit to India – where he was initially scheduled to meet Prime Minister Narendra Modi – citing his “very heavy Tesla obligations”.

Musk’s itinerary is typically scrutinised by the international business community for signs of his overseas expansion plans amid Tesla’s intense rivalry with Chinese electric vehicle makers.

In Southeast Asia, Indonesia is competing with Malaysia for Tesla’s investment. Tesla opened for business in Malaysia in July last year – its first office in Southeast Asia. Malaysian Prime Minister Anwar Ibrahim said a month later that talks were under way for Tesla to explore building a battery manufacturing plant in the country.

Putra Adhiguna, managing director at Asia-focused energy finance think tank Energy Shift Institute, said that Musk’s visit to Bali was a sign of Tesla’s plans to expand its market presence across Southeast Asia.

Tech billionaire Elon Musk walks with Indonesia’s Coordinating Minister of Investment Luhut Pandjaitan during his arrival at Ngurah Rai International airport in Denpasar, Bali. Photo: AFP

He said: “If we talk about the EV market, one of the growth markets after Europe and the United States is Southeast Asia. If Tesla is serious, maybe Indonesia will be the stepping stone [into the Southeast Asian market].”

“The expansion of Chinese EVs is very rapid. In the Indonesian market, they recently slashed the prices of their vehicles. So if you were Tesla, you’d be worried that the Chinese expansion is running too fast. They need to be quicker to enter the market.”

Indonesian officials have in recent years claimed that Tesla was keen to make significant investments in the country.

In January 2023, Tesla was reportedly close to signing a preliminary deal to set up an Indonesian manufacturing plant capable of producing up to 1 million cars annually. In 2022, Luhut claimed that Tesla had agreed to purchase US$5 billion of Indonesian nickel for its car batteries. In both instances, Tesla did not confirm any such intention.

Competition from Chinese carmakers

If Tesla were to set up an electric vehicle battery plant in Indonesia, it would be because of recent measures by the US to curb the expansion of Chinese carmakers, Putra said.

US President Joe Biden recently announced a 100 per cent tariff on Chinese-made electric vehicles. He also announced in 2022 tax rebates to entice American consumers to buy electric vehicles built in the US or with batteries containing minimal metal parts supplied by “foreign entities of concern”, such as Russia or China.

Tesla’s Model Y electric vehicles during the launch in Kuala Lumpur in 2023. Photo: Bloomberg

Electric vehicle batteries made with Indonesian components could be ineligible to qualify for the rebates as the refining of nickel – a key component of these batteries – in the country is dominated by Chinese companies, Putra said.

“Whether an EV company used batteries with nickel or without nickel, both [sectors] are still controlled by China, so they don’t have an easy way out.”

A bigger issue is whether Tesla intends to build new plants for low-cost electric vehicles given the stiff competition from Chinese carmakers, according to Putra.

Even if such a plan were to go ahead, Tesla could face stiff competition from Hyundai and China’s Wuling, the biggest sellers of electric cars in Indonesia last year, and from Vietnamese carmaker VinFast and rival BYD of China, both of which have announced plans to build manufacturing facilities in the country.

Putra said: “The next question that Musk has to ponder before investing in Indonesia is whether Tesla is serious about tapping the EV market in Southeast Asia. At the moment it’s still not clear and Tesla’s cars are still relatively expensive here.”



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