Australia and Indonesia have signed a 'win-win' EV battery deal, analyst says

Mining giants Australia and Indonesia have signed a "win-win" EV battery deal, said Sabrin Chowdhury, head of commodities analysis at BMI, a research unit of Fitch Solutions.

Indonesian President Joko Widodo met his Australian counterpart Anthony Albanese on Tuesday during a three-day state visit to Australia.

In addition to their commitment to regional peace and security, the two countries discussed economic partnerships including cooperation on electric vehicle batteries, longer business visas and investment in the green economy.

The two countries welcomed "new commercial deals between Australian and Indonesian business across the health, mining and digital economy sectors," according to a government press release.

"[Indonesia] has a major aim to develop its EV manufacturing industry. And they really need lithium for that," said Chowdhury.

"Lithium and nickel together, they're very important parts of EV batteries. So definitely, it is a win-win," she told CNBC on Wednesday.

Australia's exports to Indonesia, Southeast Asia's largest economy, hit $14.6 billion in 2022. Two-way investment in minerals and mineral processing between the countries has also grown.

During the trip, the Indonesian Chamber of Commerce and Industry and Western Australia also signed an Action Plan in a pledge to bring both parties closer and more involved in each other's critical minerals sector.

"The partnership between Indonesia and Western Australia can open up great opportunities in the critical minerals sector," said the Indonesian ambassador to Canberra, Siswo Pramono.

"Australia will become a lithium supplier and Indonesia will become a nickel supplier, both of which are the main components in EV production," he added.

Australia is the world's largest supplier of lithium. Indonesia, likewise, has the world's largest nickel reserves and is aiming to establish itself as a key global EV battery supplier. Both metals are key components in the making of EV batteries.

Demand for nickel is "very strong," as it's used in EV battery manufacturing, said Chowdhury. "The price outlook is very strong over the longer term so this will definitely benefit Indonesia," she said.

Given how Australia is a also a major producer of both nickel and lithium, Chowdhury said there is "no saying" there will not be a scenario where the country could not start their own manufacturing hub as well.

However, she highlighted there is an "accelerating demand" for EV vehicles over the coming decades, and hence there is "a lot of space" for both countries to coexist and cater to this demand.

On top of the enhanced cooperation on nickel and lithium mining, both countries also announced greater collaboration in climate and infrastructure.

Albanese announced an investment worth 50 million Australian dollars ($33 million) to attract private climate finance into Southeast Asia's largest economy.