JAKARTA (Reuters) - Volkswagen (ETR:VOWG_p) will build an electric vehicle (EV) battery ecosystem in Indonesia and will partner with miner Vale, Ford and China's battery minerals producer Zhejiang Huayou Cobalt, the Southeast Asian country's investment minister said.
Automakers are courting Indonesia for its raw materials used in producing EV batteries, which account for about 40% of a vehicle's sticker price, aiming to cut costs and close the gap on EV market leader Tesla (NASDAQ:TSLA).
Minister Bahlil Lahadalia said on Sunday that Volkswagen, Europe's biggest automaker, will work with Vale, Ford, Huayou, French miner Eramet and several Indonesian firms like Merdeka Gold Copper, the parent company of Merdeka Battery, and energy firm Kalla Group.
The partnerships would consist of joint ventures and supply raw materials, Bahlil said in a video statement from Germany, where an Indonesian delegation led by President Joko Widodo is attending industry fair Hannover Messe and meeting representatives of companies including German chemical giant BASF, Eramet and Volkswagen.
"Indonesia is an important and interesting country in terms of raw materials and we are in a positive exchange with the government and suppliers," Volkswagen said in a statement.
Meanwhile, Bahlil said BASF had also expressed an interest in building a plant to produce battery materials, partnering with Eramet, in Indonesia's north Maluku province, for a total investment of about $2.6 billion.
BASF and Eramet are jointly assessing the development of a nickel and cobalt hydrometallurgical refining complex in Indonesia, as was announced in 2020, and details would be announced once the assessment has been concluded, BASF said in an emailed response.
Bahlil said investment interest from European companies would allay concerns that Indonesia's management of its mines "did not adhere to international standards."
Widodo, who is widely known as Jokowi, told Reuters last month that Indonesia will improve monitoring of environmental standards for nickel mining, amid concerns over the impact of production of the metal.
Ford, Eramet, Kalla Group, Huayou, and Merdeka Gold Copper did not immediately respond to requests for comment. PT Vale Indonesia declined to comment.
Indonesia, which has the world's biggest nickel reserves, has been trying to develop downstream industries for the metal, ultimately aiming to produce batteries and EVs.
Last month, Ford inked its first investment in Indonesia by joining Vale Indonesia and Huayou in a $4.5 billion nickel processing plant in Southeast Sulawesi.
Volkswagen last month said it plans to invest 180 billion euros ($193 billion) over five years in areas including battery production and raw material sourcing.