Tesla’s decision to choose Malaysia over Indonesia as its operational base represents a significant opportunity for Malaysia to position itself at the forefront of the electric vehicle (EV) industry in Southeast Asia.
The same goes in respect of the promise made by the Zhejiang Geely group to Anwar Ibrahim of a US$10 billion investment to turn Tanjung Malim, Perak, into the region’s largest auto city.
It is said that Tengku Zafrul Aziz, the investment, trade and industry minister, and a passionate advocate of EVs, played a major role in Tesla’s decision when he visited its founder and owner Elon Musk earlier in the year.
The waiver of the contentious AP policy for fully imported Tesla cars is a pragmatic recognition by Tengku Zafrul that Malaysia must compete with its neighbours for leading-edge EV technology.
Likewise, Anwar’s acceptance of the Starlink satellite system from the Musk-owned SpaceX to provide prompt internet access to remote communities is a strong signal on two counts.
One is that it shows the prime minister is not afraid to challenge vested interests which hinder the communication needs of remote communities especially in Sabah and Sarawak.
The second and more significant implication is that the government has come to terms with international investment norms and will not rigidly impose the 30% capital conditions especially when this favours the privileged elite rather than national socio-economic growth.
Unlike Thailand which makes about two million vehicles a year and exports about half, Malaysia’s production of 600,000-700,000 units a year is 95% for the domestic market. The local assembly of cars from completely-knocked-down (CKD) packs is a cost-up element.
The car industry is at an inflection point, switching from combustion engines to electric motors, from hardware to software and 5G connectivity, and it is at this moment that Anwar or whoever is in government must seize the opportunity to decarbonise the automotive industry and gain market share in Southeast Asia with the help of both new players including Tesla and China car players as well some of the car companies that are already invested in Malaysia.
The transformation will take a long time. Later this month, Anwar’s government will unveil its new industrial master plan 2030 and the 2nd part of the national energy transition roadmap.
There are 1.4 billion vehicles on the road worldwide, while the entire auto industry currently has a production capacity of just under 90 million vehicles per year.
To illustrate the dimensions of the change, a global automotive component maker calculated that “even if we were to build only all-electric vehicles starting tomorrow – which is impossible simply because of a lack of battery capacity – we would need at least 15 years to replace them all.”
Similarly, a veteran automotive captain in Malaysia cautions against undue haste, and calls for the transition from internal combustion engines to be done in a more structured manner.
“Malaysia has invested in quite a substantial supply chain programme since the inception of the two national cars. A sudden switch will create social economic problems. Besides there is still the question of preparedness for the transition to the next generation electric mobility technology,” he says.
“Next generation vehicles will be equipped with high levels of connectivity and AI. This means that new methods and restructuring of services are essential, especially of facilities and human resources.
“The transition should be carried out through consumer awareness and commitment to go green. Start by reducing the number of polluting vehicles with an end-of-life programme, with incentives for owners to scrap their cars.
“The transition should be guided by the mission to decarbonise as fast as possible but in a practical manner. This means that the transition should include mild hybrids, hybrids, plug-in hybrid petrol/electric vehicles, EVs with range extenders and affordable EVs with a smaller battery but bigger range,” he said.
For the longer term, while Malaysia has its ongoing R&D programmes for alternative energy such as ocean thermal energy conversion and hydrogen power, the federal government should also reach out to car makers in Europe, Japan and South Korea which see the problems of EVs (electricity and batteries) and are working on alternatives.
The government should offer incentives to OEMs for Malaysia-based R&D for hydrogen fuel cells for vehicles.
Sarawak has already taken the lead in developing a hydrogen fuel cell eco-system powered by its green hydrogen resources. Its Autonomous Rapid Transit bus system from China is scheduled to service two routes in Kuching starting about the fourth quarter of 2025.
The government will also need to introduce new laws to encourage the electrification of transport, including providing EV owners with the “right to charge”. This means property developers will be required to supply EV charge points at public places and residential units.
The electrification of the automotive industry presents a huge opportunity for Malaysians to learn new skills and to progress beyond steel and plastic towards battery chemistry and software. With China-US tensions forcing some manufacturers to re-shore to neutral Southeast Asia, the pragmatism of Anwar’s government seems to be providing Malaysia with a new allure.
Malaysia’s population is too small to create a global automotive brand. The country cannot produce more than 600,000 to 700,000 cars a year without a decent export market.
From the point of view of a senior automotive industry analyst based in Bangkok: “In my view, in Asean, the automotive and EV leader is Thailand. The second spot is Vietnam and Malaysia. The latter is known for fantastic words not followed by action.”
The conclusion is that Malaysia’s attempted transplant of the automotive industry ignores the reality that it does not have the 70 million population that former prime minister Dr Mahathir Mohamad envisioned.
Malaysia should also build on its natural strengths as an agricultural nation with R&D to make its plantation industries more resistant to global warming.
Incentives should be provided for the use of bio-mass generators to produce bio-gas and users should be given favourable tax treatment for using bio-fuels and bio-gas for land transport.
In the meantime, Anwar and his government should continue the successful strategy that attracted investments from Tesla and the Zhejiang Geely group and accelerate the momentum of making Malaysia a more EV friendly market.
Let’s see what the new industrial master plan and the national energy transition road map will bring. Let it not be another case of just words followed by no action. - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.
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