Indonesia’s ambition to become a globally significant participant in the electric vehicle supply chain has been a defining economic story for the country through the 2020s. The combination of substantial nickel reserves, deliberate industrial policy, and aggressive courting of foreign investment has positioned Indonesia in a way that few resource-rich countries have managed.

Mid-2026 is a useful moment to take stock of what’s actually been built, what’s still in commitment, and what risks remain for the broader strategy.

What’s actually in operation

Several major investments have moved from announcement to operating status through 2024-2026.

Substantial nickel processing capacity has come online at Morowali and other major industrial parks. The output is now meaningfully integrated into battery precursor supply chains, particularly serving Chinese, Korean, and increasingly other Asian customer markets.

Multiple battery cell manufacturing facilities are now in operation, with the largest representing genuine large-scale capacity producing cells for both export and domestic vehicle assembly.

Several major automotive assembly facilities have established or expanded EV production lines. The combination of policy incentives, growing domestic demand, and proximity to ASEAN markets has supported these investments.

The full battery supply chain — from mining through to finished cells — is now operating at significant scale within Indonesia in a way that was aspirational rather than operational five years ago.

What’s still being built

Substantial additional capacity remains under construction or in committed project pipelines.

Additional nickel processing facilities are progressing through construction. The trajectory of capacity additions suggests continued substantial growth in processing output through 2026-2028.

Several additional battery cell facilities have been announced or are in advanced construction stages. The aggregate planned capacity, if all projects are completed on schedule, would substantially expand Indonesia’s position in the global battery supply chain.

Vehicle manufacturing capacity continues to expand, with major manufacturers committing to additional Indonesian production for both domestic and export markets.

Critical mineral processing beyond nickel — particularly cobalt and various rare earth processing — has been the subject of significant investment announcements. The execution of these announcements is at varying stages.

The environmental and social questions

The expansion has come with substantial environmental and social concerns that affect both the operating reality and the broader sustainability of the strategy.

Nickel processing in Indonesia uses substantial energy, and the energy mix powering the processing is heavily coal-based. The carbon footprint of Indonesian nickel processing has been a subject of substantial criticism from both environmental groups and certain customer markets, particularly European customers facing increasing carbon footprint expectations on their supply chains.

Environmental impacts beyond carbon — water use, tailings management, biodiversity impacts on the affected forests and coastlines — have been ongoing concerns that the Indonesian government has been progressively addressing through regulatory updates but where implementation gaps remain visible.

Labour conditions in some of the major industrial complexes have been the subject of substantial reporting, with concerns about wages, working hours, safety conditions, and treatment of foreign workers. The improvements that have been implemented through 2024-2026 have been real but uneven.

Community relations with the populations near major facilities have been mixed. Some communities have benefited substantially from employment and infrastructure investment; others have been displaced or have experienced environmental impacts without commensurate benefit. The government’s framework for managing these issues continues to evolve.

The trade and policy environment

The international policy environment around critical minerals and EV supply chains has continued to develop in ways that affect Indonesia’s strategy.

The European Union’s Critical Raw Materials Act and the various U.S. policy frameworks (including the Inflation Reduction Act provisions) have created complex eligibility criteria for materials and components in the EV supply chains of major markets. Indonesia’s position within these frameworks is being negotiated and the specific outcomes affect the competitiveness of Indonesian output in major markets.

The Indonesia-EU trade negotiations have been ongoing through 2024-2026. The resolution of these negotiations would have substantial implications for Indonesian exports to European markets.

The U.S. relationship with Indonesia on critical minerals has developed but remains nuanced. Indonesia is not currently a U.S. free trade agreement partner, which affects eligibility for certain IRA provisions. The “critical minerals” framework allows some Indonesian materials to qualify under specific arrangements, but the broader trade relationship remains a work in progress.

Chinese investment continues to dominate the Indonesian EV supply chain in capital terms. The geopolitical implications of this dominance are real and the Indonesian government has been navigating between maintaining the Chinese investment flow and developing relationships with non-Chinese investors and customer markets.

The competitive landscape

Indonesia faces competition from several other emerging EV supply chain locations.

Morocco has built substantial battery industry through strategic positioning between Africa and Europe. The Moroccan output is increasingly relevant to European markets where the trade and origin frameworks favour African supply.

The Philippines has been developing competing nickel processing capacity, though at smaller scale than Indonesia.

Argentina, Chile, and the broader Latin American region remain dominant in lithium supply, complementing rather than directly competing with Indonesian nickel.

Australia continues to be a significant supplier of both lithium and other critical minerals, with the Australian processing capability developing but remaining behind Indonesia’s pace.

The competitive position of Indonesia within the broader landscape remains strong but not unchallenged.

The domestic EV market

While Indonesia’s strategy has been heavily export-oriented, the domestic EV market has also been developing.

Domestic EV adoption has been growing but from a low base. The combination of policy incentives, expanded charging infrastructure, and increasingly competitive EV pricing has supported the trajectory.

The vehicle mix in the domestic market is interesting. Local Indonesian EVs from major Indonesian-Chinese joint ventures have taken substantial market share. Imported EVs, particularly from Chinese manufacturers, are also significant. Established Japanese and Korean manufacturers have invested in Indonesian EV production but their domestic share remains modest.

The two-wheeler segment is particularly significant in Indonesia. Electric two-wheelers have been growing rapidly, with both local manufacturers and various international entrants competing.

The infrastructure picture has improved but remains uneven. Major cities have meaningful charging coverage; rural areas remain sparsely served.

What’s at risk

Several factors could meaningfully derail the broader strategy.

Continued environmental criticism could affect customer market access. The European market in particular has been increasing scrutiny of supply chain emissions and environmental practices, and Indonesian output that doesn’t meet these expectations could be excluded from premium markets.

Battery technology evolution remains a structural risk. Alternative battery chemistries that use less or no nickel — particularly lithium iron phosphate (LFP) chemistry — have been growing in market share. If LFP or other non-nickel chemistries continue to gain ground, the structural demand for Indonesian nickel could weaken.

Currency and macro stability matter substantially. The Indonesian rupiah’s stability and the broader macro environment affect the long-term economics of the substantial capital commitments being made. Periods of macro stress have affected past Indonesian investment cycles and could affect this one.

Political continuity matters. The current Indonesian government’s commitment to the EV supply chain strategy has been clear and sustained, but the long-term implementation depends on political continuity that can’t be guaranteed.

Geopolitical positioning between China, the US, and Europe will continue to require careful navigation. A misstep in this navigation could affect investment flow or market access in ways that would be difficult to recover from.

The honest summary

Indonesia’s EV supply chain strategy in mid-2026 has achieved more than scepticists predicted but less than the most optimistic boosters claimed. The build-out has been real and substantial. The integration with global markets has progressed. The economic benefits to Indonesia have been meaningful.

The strategy is not complete. The most ambitious projections for what Indonesia’s role could be by 2030 remain ambitious; the realistic projections for 2030 are still substantially below those aspirations but well above where Indonesia was in 2020.

The risks are real and persistent. The opportunities are real and substantial. The trajectory through 2026-2028 will tell us whether Indonesia’s bet on becoming a major EV supply chain participant proves to have been a defining strategic success or a partial achievement against more ambitious goals.

For Indonesia’s broader economic development, the EV supply chain story is the most significant single industrial development of the current decade. The outcomes matter substantially.