Much ado about Tesla

 

From Ong Kian Ming

Last week, there was a lot of media buzz and commentary after a Thai newspaper, the Nation, reported that Tesla had cancelled their plans to build an auto manufacturing facility in Thailand and was also not considering other new locations for factory expansion outside their existing plants in China, Germany, and the US.

Some of these comments were targeted at Prime Minister Anwar Ibrahim for his inability to 

deliver

 more Tesla investments despite showering much attention on Elon Musk and granting special exemptions to Tesla and Starlink, another Musk-owned company.

A more careful reading and understanding of the larger electric vehicle (EV) landscape shows that Anwar took the right approach in courting Tesla and that Malaysia is in a strategic position to grow the domestic EV ecosystem moving forward, despite Tesla’s decision to pull back from further factory expansion.

The first point of note is that Anwar did the right thing from a policy perspective to engage Musk publicly in July 2023 to invite Tesla to start selling their vehicles in Malaysia and to invite Starlink to offer their services domestically.

Thai prime minister Srettha Thavisin was courting Tesla very publicly (as well as a number of other EV players from China, including BYD).

Anwar would have been severely criticised if Tesla had decided to invest in Thailand and if he was seen as not making an effort to offer a similar or even better pitch to Musk to consider Malaysia as an investment location.

Anwar’s efforts were reported by the international media which would have helped improve Malaysia’s image as an investor-friendly location, with the country’s prime minister as its main salesperson.

Secondly, challenges to Tesla in their main domestic market and in the global EV market made it very difficult to consider any near-term expansion plans.

This was coupled with changes in some of the key positions in Tesla in April 2024 that involved individuals who had the mandate to expand Tesla’s operations to new locations.

In other words, there was nothing that the Malaysian government could have done to incentivise Tesla to set up a new factory in Malaysia.

Thirdly, the Malaysian EV ecosystem definitely benefited from Tesla’s entry into the market last year.

The special approved permit (AP) that allowed Tesla to bring in its vehicles into Malaysia without the need for a local partner meant that the pricing of the Model 3 and the Model Y was 50% cheaper than via the traditional AP route. This resulted in brisk sales for Tesla, numbering almost 1,000 units a month, according to unofficial sources.

This facilitation also led to the launch of Tesla’s experience centre in Cyberjaya, Selangor, in record time.

This centre, as the headquarters of Tesla Malaysia, not only provides a few hundred high-quality jobs to Malaysians, but also provides an opportunity to grow the EV servicing ecosystem to increase knowledge sharing on Tesla EV best practices in terms of maintenance, charging and software-related issues and to increase supercharging accessibility through Tesla’s ultra-fast chargers.

This is part and parcel of the conditions set by the investment, trade and industry ministry (Miti) for Tesla’s entry into the Malaysian market without having the need of a franchise AP.

I am confident that Miti and the Malaysian Investment Development Authority (Mida) will continue to monitor the fulfilment of these conditions.

It is likely that Tesla’s pricing structure also set the benchmark for other recent EV players in the Malaysian market, such as BYD’s Dolphin and Seal vehicles, which are priced at less than RM200,000.

Fourthly, we should look at our engagement with Tesla and the larger Musk ecosystem (which also includes Space X and other ventures) as a continuous process where other economic activities can be brought to Malaysia as and when conditions are right.

The pay-off may only come later but the trust-building process has already started.

Fifthly, the current global oversupply of EV vehicles and the very aggressive policies undertaken by the EU and the US against Chinese-made EVs are signals that Malaysia should take a more deliberative approach to expanding the EV manufacturing ecosystem in Malaysia.

The rapid expansion of the number of imported EVs and incentives to establish EV manufacturing capabilities in Thailand has led to a short-term glut of vehicles and damaged the local automotive vendor ecosystem.

It may make more sense to grow the domestic EV vendor ecosystem strategically over time rather than rush into large-scale production which would inevitably mean the relocation of entire supply chains from China without much local input.

Malaysia should also consider growing the domestic two-wheeler production ecosystem to cater for local and then later Asean demand since this segment of the market requires less capital expenditure compared to the production of 4-wheeler EVs.

Meanwhile, Malaysia should learn from our engagements with Tesla and other EV players to improve our EV policy ecosystem.

Some recommendations include the following:

1. Engage with different players from different countries to grow the domestic EV ecosystem, including the manufacturing of EV vehicle components such as electronics for the Lidar and entertainment systems, higher-grade automotive steel, battery components and charging station parts, just to name a few.

2. Expand the policy scope of EVs to include the manufacturing of hybrids and also two-wheeler EVs in the country. (Right now, too much of the focus is on four-wheeler EVs.)

3. Update the National Automotive Policy (NAP) 2020 to incorporate new trends and technologies in the automotive industry, especially in the area of skills development for the EV sector (two-wheelers and four-wheelers) in the manufacturing and servicing space.

If we position ourselves strategically, we can reap the benefits of the hybrid/EV transition to make Malaysia a long-term player in this space.

We shouldn’t feel the need to have knee-jerk reactions to newspaper reports. - FMT

Ong Kian Ming is a Mida board member and a former deputy international trade and industry minister.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.