German carmaker Volkswagen will commence a feasibility study in the coming months as part of its plan to build a factory for electric vehicle batteries in Indonesia, a senior government official said.
On Sunday, Ikmal Lukman, secretary general at the Indonesia Investment Coordinating Board (BKPM), told local media Kumparan that the auto firm’s investment in the factory is expected to reach $5 billion.
The plant’s construction is targeted to start this year, Lukman said. Although the company has chosen a location for the plant, he declined to reveal any details.
“[The plant] will supply the world’s demand for battery components. This is a matter of pride for us as we have been trusted,” he said, noting that the plant will produce both batteries and electric cars.
Lukman’s comment came after minister Bahlil Lahadalia said last month that Volkswagen will work with Vale, Ford, Huayou, French miner Eramet and several Indonesian firms such as Merdeka Gold Copper, the parent company of Merdeka Battery, and energy firm Kalla Group to build an electric vehicle (EV) battery ecosystem in Indonesia.
A separate statement by President Joko Widodo’s office said Volkswagen’s investment will be carried out by its battery unit, PowerCo.
Given its natural abundance of nickel, copper, and cobalt, which are critical raw materials for electric vehicle batteries, Indonesia is one of the hottest destinations for EV-related investments. DealStreetAsia’s recent report on Indonesia’s EV ecosystem also noted that the country has recently announced that it would reduce the VAT on EVs to 1% from 11% to spur consumer demand while incentivising producers.