Jakarta. Indonesia holds one of the world’s largest strategic advantages in the global electric vehicle supply chain through its abundant nickel reserves, yet it has so far failed to convert that edge into a leading position in battery-cell manufacturing, according to an industry analyst.

Agus Purwadi, a researcher at Bandung Institute of Technology, described the situation as a paradox that requires urgent resolution.

Indonesia is still concentrated in lower-value downstream activities such as producing nickel pig iron (NPI) and nickel sulfate—segments that generate significantly less value than battery-cell manufacturing.

“If we look at the nickel value chain, the greatest value-added lies in cell production. From raw materials to cells, value can rise many times over. But we are still operating at the lower end,” Agus said.

As a result, much of the economic value derived from Indonesian nickel continues to flow overseas, where battery cells are actually manufactured.

Despite being a major supplier of raw materials, Indonesia’s share of global battery-cell production remains minimal, estimated at only around 0.4%. The figure suggests that the country’s much-promoted downstream industrialization strategy has yet to fully penetrate the most profitable segment of the market.

Battery cells are the core component of electric vehicles, and their production is highly complex, involving as many as 16 stages, advanced technology, and substantial capital investment.

“To reach economies of scale, a battery-cell plant requires a minimum capacity of more than 10 gigawatt-hours, with investment running into billions of dollars,” Agus said.

He noted that this creates a major hurdle for Indonesia. Beyond high capital requirements, the battery-cell industry also needs market certainty. Without clear demand -- either from domestic buyers or export markets -- investors are likely to hesitate.

Global Oversupply Risks
Indonesia’s challenge is compounded by global market conditions. Based on recent projections, worldwide battery production capacity by 2030 is expected to exceed demand by around 45%.

That means leading producers such as China and the United States will not only dominate technology and manufacturing, but also possess surplus capacity capable of flooding global markets.

Agus said China’s dominance is likely to continue through 2035, spanning the full value chain -- from component manufacturing and battery production to electric vehicle sales.

“This creates a double challenge for developing countries like Indonesia: competing against established global players while also trying to attract investment in an oversupplied market,” he said.

At home, another key obstacle is the high tax burden embedded in vehicle pricing. Agus said around 40% of a car’s retail price in Indonesia is made up of taxes, limiting growth in the domestic EV market.

Regional Competitors Advancing
Meanwhile, several Asian peers are making faster progress in building battery and EV industries. India and Vietnam, for example, have advanced through clearer policy direction and more consistent implementation.

India, despite lower GDP per capita than Indonesia, has accelerated electrification by focusing on two- and three-wheel vehicles. Vietnam, meanwhile, has developed its industrial base through partnerships with global players while strengthening domestic brands.

“Without a clear and measurable strategy, Indonesia risks becoming merely a market for imported products and a raw material supplier to global industry,” Agus said.