EV Makers Face Headwinds as Indonesia Slashes Nickel Supply
A planned 44% cut in the 2025 mining quota, compounded by disruptions at a key processing plant, threatens to raise battery material costs for automakers.
The global electric vehicle industry is bracing for a potential supply shock as Indonesia, the world's undisputed nickel superpower, prepares to significantly curtail its output in 2025. The planned reduction threatens to increase the cost of EV batteries, a critical component whose falling price has been a primary driver of vehicle affordability and adoption.
Jakarta has confirmed plans to reduce its national nickel mining quota by a staggering 44% for 2025, lowering the cap from 272 million tons to 150 million. The move, intended to preserve the nation's strategic reserves and encourage more sustainable processing, could remove more than a third of the global nickel supply, according to analysts at Macquarie Group. Indonesia currently accounts for over half of the world's mined nickel, making any policy shift a matter of global significance for automakers from Tesla to Ford.
Compounding the macro-level supply squeeze are acute, on-the-ground disruptions. A major processing facility, QMB New Energy Materials in the Morowali Industrial Park, has reportedly halved its production following government safety inspections. The plant, a key producer of battery-grade nickel, has faced severe operational challenges, including a deadly landslide earlier in the year linked to waste management failures, as reported by Reuters.
"The combination of a strategic national quota reduction and specific operational failures creates a dual threat for the EV supply chain," noted a commodities strategist. "Automakers have banked on a stable, low-cost supply of Indonesian nickel to meet their ambitious production targets. That assumption is now being seriously tested."
The news presents a fresh challenge for an EV sector already navigating a complex market. Industry leader Tesla (NASDAQ: TSLA), with a market capitalization exceeding $1.3 trillion, has seen its earnings growth moderate. Meanwhile, competitors like Rivian (NASDAQ: RIVN) are still focused on scaling production profitably. A sustained increase in the price of nickel, a key cathode material in high-performance batteries, could pressure margins and potentially slow the pace of EV price reductions.
This supply-side pressure may accelerate a strategic pivot already underway in the industry: the shift toward alternative battery chemistries. Many automakers, particularly in China, have been increasing their use of Lithium Iron Phosphate (LFP) batteries, which are cheaper and do not use nickel or cobalt. While typically offering lower energy density, advancements in LFP technology are making it a viable alternative for a growing range of mass-market vehicles.
The Indonesian government's actions are part of a broader strategy to exert more control over its natural resources and move up the value chain, rather than simply exporting raw ore. However, the shift to a one-year quota approval process from a three-year system is also injecting a new layer of regulatory uncertainty, making long-term planning more difficult for miners and their automotive partners. For an industry that relies on multi-year investment cycles and stable supply lines, such volatility presents a significant headwind for the road ahead.