Indonesia is offering a limited free trade agreement with the United States on critical minerals. This deal could benefit companies operating in the electric vehicle battery supply chain, such as Tesla, who may be interested in sourcing nickel from Indonesia.
Indonesia's proposal comes as the US government released new guidance on tax credits for electric vehicles under the Inflation Reduction Act. The guidelines require certain battery components to be manufactured or assembled in North America or from a free trade partner. This aims to reduce the US's dependence on China for the development of the electric vehicle battery supply chain.
With the growing popularity of electric vehicles, the demand for nickel, which is a key component in electric vehicle batteries, is also increasing. This is where Indonesia's offer comes in. Although the country does not have a free trade agreement with the US, its nickel products are becoming increasingly important in the supply chain.
If the agreement is signed, Tesla and other companies could benefit from it. Tesla is a leading electric vehicle manufacturer, and the company has been making efforts to increase its supply of key minerals for its batteries. This deal with Indonesia could provide a new source of nickel for the company.
Indonesian Minister Luhut Panjaitan is leading efforts to attract US companies to Indonesia. He said that he would meet with Ford and Tesla executives to discuss the matter when he travels to the US later this week. The proposal for a limited free trade agreement is likely to be similar to what the US has signed with Japan regarding trade in key minerals, Reuters reports.
In essence, the deal means that for critical minerals, there will be free trade with requirements on processing, such as for nickel, aluminum, cobalt, copper. This means that companies like Tesla could benefit from access to key minerals while still complying with US tax incentives.
The proposed agreement is a significant development for the electric vehicle industry, and it highlights the importance of adapting to new technologies and changing supply chains. Tesla's interest in the deal shows that the company is committed to sustainability and reducing its carbon footprint. If the agreement is signed, it could be a win-win situation for both Indonesia and Tesla.
Armen Hareyan is the founder and the Editor in Chief of Torque News. He founded TorqueNews.com in 2010, which since then has been publishing expert news and analysis about the automotive industry. He can be reached at Torque News Twitter, Facebok, Linkedin and Youtube.