Tesla Inc. is close to sealing a preliminary deal to set up a factory in Indonesia, according to people familiar with the matter, as Elon Musk’s electric vehicle pioneer looks to capitalize on the Southeast Asian nation’s reserves of key battery metals.
The plant would produce as many as 1 million cars a year, the people said, in line with Tesla’s ambition to have all its factories globally reach that capacity. The discussions include plans around multiple facilities in the country, serving different functions across production and the supply chain, one of the people said. A deal hasn’t been signed and the agreement could still fall through, said the people, asking not to be identified as the talks are confidential.
Musk and representatives for Tesla didn’t immediately respond to an email seeking comment. Indonesian Investment Minister Bahlil Lahadalia said talks with Tesla are being led by the coordinating ministry for maritime affairs and investment when asked about the potential deal on Wednesday. A representative for the ministry didn’t immediately respond to requests for comment.
Indonesia has long courted Tesla, last year striking a US$5 billion nickel supply agreement with the carmaker. In an interview in August with Bloomberg News, President Joko Widodo said the country wants Tesla to make electric cars there, not just batteries, and is willing to take the time to convince Musk to see Indonesia as more than just a supplier of key resources.
An Indonesian factory would be Tesla’s third outside its home market in the US, joining facilities in Shanghai and a plant near Berlin. While Indonesia offers a gateway to Southeast Asia’s 675 million consumers, it’s a tough market for global automakers, given affordable cars — usually priced below $20,000 — make up the bulk of sales.
In China, Tesla earlier this month cut the starting price for it locally built Model Y sport utility vehicle to a new low of 259,900 yuan ($38,360) from 288,900 yuan — about 40% less than the most basic Model Y available in the US. That came after the company delivered fewer vehicles than expected last quarter and missed its goal of 50% annual sales growth.