CATL plans to build a US$5 billion Indonesia plant

Workers checking products at Contemporary Amperex Technology’s factory in the Fujian provincial city of Ningde

Contemporary Amperex Technology (CATL), China’s largest producer of automobile battery packs, plans to build a US$5 billion plant in Indonesia to establish a beachhead in the world’s fourth-most populous nation as electric vehicles gain popularity, reports.

The lithium-ion battery assembly in Indonesia will be the second offshore production line for CATL, based in the Fujian provincial city of Ningde, following its US$2 billion plant in Germany that will supply BMW when it begins production in 2021.

The new plant will start production in 2024, the country’s Deputy Minister at the coordinating ministry of maritime and investment affairs Septian Hario Seto said during a virtual briefing on Tuesday without disclosing its exact location, according to Reuters. CATL’s executives would not comment on the investment plan.

The plan by CATL was announced following a personal invitation by the Indonesian President Joko Widodo for Tesla to build an electric vehicle assembly in his country.

During a December 11 phone call  with Tesla’s chief executive Elon Musk, Widodo discussed the industry and the main components for EV batteries, Indonesia’s investment ministry said in a statement. The president also asked Musk to consider Indonesia as a potential launch site for SpaceX, his aerospace manufacturing and space transport venture.

“Chinese electric vehicle components suppliers, particularly the battery makers,

need to plan ahead for a boom in sales of the cars over the coming years,” said Gao Shen, an independent analyst on manufacturing sectors in Shanghai. “
Indonesia is the place where rich resources of nickel  laterite ore attract CATL to make investment.”

The Chinese company, whose battery packs are used in almost every major automobile brand including Tesla’s Model 3 electric cars assembled in Shanghai, signed an agreement with PT Aneka Tambang the Indonesian state miner to ensure that 60 per cent of the nickel mined in the country would be processed into batteries.

“We do not want them to get our nickel but then process it abroad,” the deputy minister Septian said, according to Reuters.

The global supply chain for electric vehicles could be valued at up to US$66.7 billion annually, according to a 2018 European Commission estimate. Indonesia, with a rich supply of nickel laterite ore used in batteries, aims to eventually become a global hub for producing and exporting electric vehicles.

South Korea’s LG Chem, one of the world’s largest battery makers and a competitor to CATL, is considering to invest US$9.8 billion in a battery factory, integrated with a lithium smelter, the Indonesian government said in June.

Sales of new-energy vehicles (NEV), including pure electric, purely electric, petrol-electric hybrid and fuel-cell-powered cars, would rise 40 per cent to 1.8 million units next year, from an estimated 1.29 million units for the whole of 2020, according to a forecast by the China Association of Automobile Manufacturers (CAAM).

Chinese central and local governments’ incentives to encourage use of NEVs, ranging from cash subsidies, exemption of consumption tax and distribution of fee car-plate licences are set to fire up sales of green cars in the coming years.

Sales of new NEVs are likely to top 3 million in 2025 in China, according to a consensus forecast by industry officials.

CATL reported profits of 1.4 billion yuan (US$214 million) in the third quarter ending September 30, up 4.2 per cent from a year ago, while revenue rose 0.8 per cent to 12.7 billion yuan.

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