Lithium trade Indonesia and Australia: 7 business opportunities

Lithium Trade Opportunities: Indonesia-Australia Partnership

  • InCorp Editorial Team
  • 2 July 2025
  • 5 minutes reading time

Indonesia and Australia have solidified their partnership for lithium trade, fueling hopes for a greener and more sustainable future. The move is made to capitalize on the global demand for lithium surging due to its vital role in electric vehicle batteries and energy storage solutions. 

This collaborative effort between the two nations holds immense economic growth and environmental preservation potential. As businesses eagerly explore avenues to participate in this market, understanding how to invest in lithium becomes a key point for those seeking to thrive in the growing lithium industry.

Indonesia’s ambition to expand the EV industry

Lithium trade Indonesia and Australia: 6 business opportunities

Indonesia has set an ambitious target for electric vehicle (EV) adoption. The world’s richest nickel reserves aim to have 400,000 electric four-wheelers and 1.8 million battery-powered vehicles by 2025. The growth of EVs in Indonesia has been evident in recent years. 

The growth is supported by the increasing number of two-wheeled EV units, from 1,947 in 2020 to 26,000 units by the end of 2022. While the four-wheeled EVs experienced an even more significant increase, with a 33-fold rise from 230 units in 2020 to 7,600 units in 2022.

A joint study by AC Ventures and e-mobility association AEML indicates that Indonesia’s electric vehicle ecosystems will gain a better market. The report highlights that the automotive research and development (R&D) and manufacturing sectors offer the most extensive total available market, presenting an opportunity of USD 12.5 billion to USD 15 billion by 2030.

Given the positive outlook and ambitious target for EV development, the government also considers securing the critical minerals for EV battery production as the most important component for EVs.

Read more: The Investment Opportunity for an Electric Vehicle Ecosystem in Indonesia

Lithium is one of the critical minerals for EV batteries

Most of EV currently use lithium-ion and lithium-polymer batteries due to their relatively higher energy density in comparison to their weight.

Lithium is one of the critical minerals for EV batteries. Lithium-ion batteries facilitate the movement of lithium ions from the anode to the cathode, generating power. Besides lithium, other critical minerals for EV batteries include nickel, manganese, cobalt, graphite, and steel.

Indonesia-Australia trade partnership for lithium

Lithium trade Indonesia and Australia: 6 business opportunities

The Indonesian government is planning to secure an additional 60,000 tonnes of lithium per year from Australia to support the development of a comprehensive EV industry in Indonesia.

This additional quota would double the previous agreement between the two countries. Indonesia is expected to get 120,000 tonnes of lithium from Australia annually.

Indonesia holds the world’s largest nickel reserves, a significant advantage as the country aims to become a global EV production hub. However, it lacks domestic lithium supplies, which is equally crucial for EV batteries.

On the other hand, Australia possesses 53% of the world’s lithium output, making it a valuable source for Indonesia’s lithium needs.

This trade partnership is expected to meet the increasing demand for EV batteries in Indonesia. The country’s annual battery demand is projected to reach 20.1 gigawatt-hour (GWh) by 2030 and rise to 59.1 GWh by 2035. 

Challenges to value chain trade 

Albeit the partnerships between Indonesia and Australia present opportunities in establishing a secure value chain for EV battery development, they also face potential challenges, as follows:

1. Environmental 

The extraction, refining of raw materials, and cell production in the battery industry can cause significant environmental damage, including land degradation, loss of biodiversity, hazardous waste generation, and water, soil, and air contamination.

2. Social 

Without proper management, operations within the battery value chain can negatively impact local communities by violating labor laws, employing child and forced labor, and infringing on indigenous rights, particularly in emerging markets.

3. Governance 

Companies in the battery industry may face conflicts of interest or interact with poorly managed organizations.

4. Political 

With the upcoming Indonesia general election in 2024, there is no guarantee that the new leadership will continue striving for trade partnerships for Australia’s lithium.

Business opportunities for the EV industry

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Despite the potential challenges, Indonesia’s ambition to develop the EV industry also presents several new business opportunities, as highlighted below:

1. Manufacturing

Several manufacturing categories will grow as EVs gain momentum, such as  EV manufacturing, EV battery manufacturing, and electric vehicle supply equipment manufacturing.

2. Infrastructure

Supporting infrastructure, such as charging stations, is highly required for EV-wide adoption in the country.  

Read also: Guide to Invest in Lombok Property for Australians 

3. Software development

Several supporting software is expected to be developed to ensure the EV is safe, secure, intelligent, and connected.

4. Training and skill development

The growing EV industry also requires a more skilled individual to keep pace with the technological advancement in this sector.

5. Dealership and franchise

The rise in electric vehicle production creates new possibilities for dealerships and franchise opportunities.

6. Maintenance and reparation

Maintaining an EV differs from keeping an internal combustion engine (ICE) vehicle. EV maintenance requires specialized expertise due to the different powertrain components used in EVs.

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Conclusion

The Indonesia EV industry is gaining momentum following the trade partnership with Australia for lithium supply. This collaboration is set to fulfill Indonesia’s demand for lithium and aid in developing EV batteries, benefiting from Australia’s vast lithium reserves.

The growth of the EV industry in Indonesia creates various business and investment prospects. Companies aiming to capitalize on the expanding EV industry’s potential can seek assistance from InCorp Indonesia, especially for company registration and business licensing.

InCorp Indonesia (an Ascentium Company) has a decade of experience and a vast network, offering a wide range of market entry and corporate services to domestic and international clients looking to expand and operate in Indonesia and the broader Southeast Asia region.

Verified by

Hotdo Nauli

Senior Legal & Delivery Manager at InCorp Indonesia

Hotdo heads the Legal and Delivery team at InCorp Indonesia, managing Product Registration, Legal Advisory, and Business Licensing. With over 8 years of experience, she focuses on compliance and integrity, ensuring all client operations align with Indonesian laws and regulatory standards, including contract reviews and sector-specific licenses. She is also a licensed advocate and a member of the Indonesian Advocates Association (PERADI). 

Frequently Asked Questions

    A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.

    • Import facilities
      Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production.
    • Tax holiday
      The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status.
    • Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.

    • Tax allowance
      For companies in certain designated areas or regions, the government may provide the following tax concessions:
      Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
      Accelerated depreciation and/or amortisation deductions
      An extension of tax losses carried forward for a maximum of ten years
      A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
      The applicant eligible has to meet high-level-criteria for the above tax facilities:
      High investment value or for export purposes
      High manpower absorption
      High level of local content
    • Investment allowance
      The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project.
    • Super deduction
      This facility could be granted to certain businesses, such as:
      60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
      Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
      Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.

    Investors considering investments in Indonesia should assess existing International Investment Agreements between Indonesia and other countries. Having a business presence in countries with such agreements may offer incentives like stronger investment protection and higher foreign shareholding in Indonesia.

    Dividends can be distributed from company net profits after allocating reserves, depending on a positive profit balance. Approval from the general meeting of shareholders is necessary. Interim dividends may be distributed if specific requirements are met.

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