China’s dominance in the clean technology supply chain has many countries worried about their future competitiveness, and Indonesia is no exception. With around half of the world’s nickel production – a critical mineral for the transition to electric vehicles – Indonesia should, in theory, hold significant power in setting standards for investments in nickel development. Yet despite the promise of nickel’s potential towards electric vehicles, this leverage seems elusive.

Although Indonesia’s basic nickel processing sector emerged quickly, it was marred by repeated factory explosions and widespread environmental and social impacts. This raises an important question: why was the bar set so low?

Devaluation has its merits, as evidenced by the tens of thousands of jobs created. However, too much emphasis has been placed on turning inwards and far too little consideration has been given to developments in the global market. Despite its dominance in nickel production, Indonesia’s share of global battery production capacity remains just 0.4%. Two-thirds of its nickel production still goes to the stainless steel industry, while intermediate products for battery production are only beginning to emerge. Additionally, the country competes fiercely with its neighbors through electric vehicle incentives and tax breaks to encourage battery and electric vehicle makers to build factories.

So, was the recent nickel smelter surge even necessary to realize Indonesia’s ambition to become an “electric vehicle giant”? After all, it is demand for electric vehicles, not nickel, that is driving investment in electric vehicles and batteries. Indonesia’s plan to gradually move up the value chain, starting with mining and smelting, is facing headwinds. Other countries are bypassing these steps and going straight into battery and electric vehicle production.

Once again, the ladder leading to the summit appears to have been toppled. It is time to realize that Indonesia’s electric vehicle ambition is compromised and requires a strategic overhaul. Recently, Beijing reportedly advised its automakers to keep production of key parts of electric vehicles in China, further raising the stakes for Indonesia. All hope is not lost, but charting a path forward requires a dose of honesty.

Every Thursday

Whether you’re looking to broaden your horizons or stay informed about the latest developments, Viewpoint is the ideal source for anyone looking to address the issues that matter most.

for subscribing to our newsletter!

Please check your email for your newsletter subscription.

See more newsletters

First, Indonesia needs a clear-eyed assessment of the global nickel, battery, electric vehicle and stainless steel industries. The world has changed since Indonesia’s swallowing policy was launched. The new administration must understand what benefits the country has lost through various incentives and what gains companies have accrued through access to cheap nickel ore, coal, and compromised environmental standards, while keeping track of whether these benefits end up going abroad or staying in Indonesia.