Indonesia nearly has a monopoly on nickel. What next?

Prabowo Subianto, the new President, wants to create an electric car supply chain.

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In 1996, Mr Tommy Suharto, the youngest son of Indonesia's dictator, set out to build the Timor, a national car. The plan was to import models manufactured by Kia Motors, a South Korean carmaker, and rebrand them. Kia would teach Indonesians car-making; strict local-content requirements would ensure the economy benefited.

But as a financial crisis in 1997 battered Indonesia's car market, 15,000 Timors sat idle in a carpark. By 1998, as riots in Java brought down the Suharto regime, embarrassed Indonesians who owned the national car tore off their "T" logos. Under pressure from furious trade partners, the Timor was withdrawn.

Yet the economic-nationalist spirit that infused the Timor has never quite gone away. Today, it animates Indonesia's programme of "downstreaming", or moving towards higher value-added activity. The policy is being championed afresh by Mr Prabowo Subianto, the new President.

One mineral is the linchpin of this policy: nickel, a crucial material for electric vehicle (EV) batteries. A nickel-ore export ban came into force in 2020. Now, Indonesia dominates global nickel-mining and smelting. It produces nearly half the world's refined nickel and two-thirds of its mined nickel. Both shares have doubled since 2020. In 2023, Indonesian exports of processed nickel amounted to US$22 billion, or 9 per cent of total exports, up from 2 per cent in 2019.

As Indonesia's market share has multiplied, so too has the grandeur of its politicians' ambitions. With local content requirements as a stick and lavish tax incentives as a carrot, the idea is to create a complete EV supply chain on Indonesian soil. So far, only China has managed to do this. Even so, politicians are bullish. Mr Luhut Pandjaitan, the architect of downstreaming, thinks Indonesia could be a top-three producer of both batteries and EVs by 2027.