Jakarta. Indonesia needs to introduce incentives to the recycling industry of electric vehicle (EV) batteries, according to an expert. 

Bhima Yudhistira, the executive director of the economic think-tank Celios, said Tuesday that Indonesia could run out of nickel -- a mainstay ingredient in EV battery production -- if it continues to mine the metal. 

“We should provide incentives to the EV battery recycling industry. … There are warnings that our nickel supply is not as much as we think. Mining associations have warned that the reserves would only last for 7-15 years,” Bhima said in Jakarta.

Bhima said the Indonesian government should provide the decades-long tax holidays that nickel smelters enjoyed. The Investment Affairs Coordinating Ministry revealed last August that nickel smelters with an investment of at least Rp 30 trillion (about $1.9 billion) were eligible for a 20-year holiday for its corporate income tax. Smelters with investments below Rp 30 trillion could only get a tax holiday that ranges between 5 and 15 years.

“The government can also try to help the recycled batteries get absorbed by the domestic automotive industry. Another possible incentive is a 0 percent export duty on recycled batteries,” Bhima said.

Indonesia is home to the world’s largest reserves of nickel. 

According to the 2024 US Geological Survey report, Indonesia’s nickel reserves amount to approximately 55 million metric tons. Followed by Australia at 24 million metric tons. Throughout 2023, Indonesian mines produced approximately 1.8 million metric tons of nickel.

Indonesia is aiming to be a leading producer of EV batteries. The Southeast Asian country has banned the export of unprocessed nickel ores in a move to get foreign investors to build the metal’s processing facilities domestically. 

South Korean automaker Hyundai and Seoul-based battery maker LG Energy Solution are currently constructing a $1.1 billion EV battery cell plant in Karawang. This factory is expected to begin production of a total of 10 Gwh worth of NCMA lithium-ion battery cells annually which is enough to power over 150,000 battery-based EVs.