Indonesia’s ambitious plan to create a world-class electric vehicle (EV) ecosystem may fall short of absorbing its rapidly expanding nickel production, with new research suggesting the government to adopt a “dual-track downstreaming strategy that balances EV development with a stronger push into metallurgical industries.

A report released by the Energy Shift Institute (ESI) argues that even under the country’s most optimistic EV manufacturing scenario equivalent to 1 million EV units per year, the domestic EV and battery industry would consume less than 1 percent of Indonesia’s nickel output.

By contrast, metallurgical applications such as stainless steel, plating, and nickel alloys could absorb up to 60 percent of national production, providing a more realistic and scalable industrial pathway.

“Local manufacturing built around stainless steel presents a much larger growth opportunity because it serves diverse end-use sectors. It deserves far stronger industrial policy support than it receives today,” Associate Principal at Energy Shift, Ahmad Zuhdi, told a media conference on Wednesday, November 26, 2025.

The report criticizes government’s long-standing narrative that EV production is the natural downstream of nickel mining.

Earlier this year, the government floated the idea of limiting EV manufacturers from using lithium-iron-phosphate (LFP) batteries which contain no nickel despite the fact that LFP currently dominates EV sales across Indonesia, the broader Asian market, and nearly half of global EV sales in 2024.

According to ESI, treating EVs as a direct downstream product of nickel simplifies a complex supply chain. “Cars are highly complex consumer products involving thousands of components from dozens of countries. Nickel sulfate in lithium-ion batteries accounts for only about 2 percent of EV manufacturing costs,” Zuhdi said.

Structural constraints also limit the country’s export ambitions. Global data shows that 97 percent of vehicles are assembled in the region where they are sold, making Indonesia’s EV export prospects inherently limited.

“There is simply no feasible scenario where Indonesia converts more than a few percent of its nickel into EVs or EV batteries,” Zuhdi added.

Metallurgy industry

ESI’s analysis suggests that focusing solely on EV risks overlooking more reliable and environmentally credible opportunities in metallurgical industries.
While only 5 percent of nickel containing lithium-ion batteries are recycled, stainless steel boasts a recycling rate of 95 percent, strengthening its green credentials.

Metallurgy, the report notes, also aligns better with Indonesia’s existing capabilities its so-called nearby industries and is less vulnerable to foreign technological shifts.

“Indonesia can build strong local brands that appeal to consumers willing to pay a premium for ethically produced goods, similar to organic food or eco-tourism,” Zuhdi said.

Dual-track industrial strategy

To unlock these opportunities, ESI recommends that the government pivot to a dual industrial strategy. First, continue supporting EV adoption, but without mandating specific battery chemistries such as nickel-heavy NMC batteries.

Second, simultaneously expand metallurgical manufacturing, creating Small and-Medium Enterprise (SME)-led clusters that produce stainless steel household goods, construction materials, and industrial components.

The report argues this approach would produce wider economic spillovers, more employment, and greater long-term resilience.

“Indonesia simply produces more nickel than its EV sector will ever need. A dual-track strategy is essential for sustainable industrial growth,” the ESI report notes.

Indonesia exported 4.7 million tons of stainless steel in 2024,but imported US$44.2 billion in stainless steel end-products highlighting a substantial gap in domestic manufacturing.

Under ESI’s base-case scenario, Indonesia could raise its domestic nickel consumption for non-EV uses to 900,000 tons annually, up from 400,000 tons in 2024.

In a high-growth scenario where Indonesia captures part of China’s market share, nickel use could rise to 1.5 million tons or 64 percent of last year’s mining output.

“Global trend may shift away from nickel-based EV batteries. But metallurgical uses will remain a captive market for nickel,” Principal at Energy Shift, Ian Hiscock, said.

He stressed that government incentives should prioritize supply chains that offer traceability, green credibility, and strong SME participation areas where Indonesia already holds competitive advantages.