LAST week, there was a lot of media buzz and commentary when a Thai newspaper 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 United States.

Some of this commentary was targeted towards Prime Minister Datuk Seri Anwar Ibrahim for his inability to “deliver” more Tesla investments despite showering much attention on Elon Musk and granting special exemptions to Telsa 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 Telsa’s decision to pull back from further factory expansion.

The first point of note is that Anwar did the right thing from an optics and 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 serves domestically.

The 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 Telsa 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 benefitted from Tesla’s entry into the market last year.

The special Approved Permit (AP) which 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 which 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 MITI for Tesla’s entry into the Malaysian market without having the need of a franchise AP. I am confident that MITI and 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 into 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 coupled with very aggressive policies undertaken by the EU and the United States 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 inputs.

Malaysia should also consider growing the domestic 2-wheeler production ecosystem to cater for local and then later ASEAN demand since this segment of the market requires less CAPEX 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:

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. - Aug 12, 2024

Former DAP MP for Bangi Ong Kian Ming was also the deputy international trade and industry minister during the first Pakatan Harapan (PH) administration (July 2018-February 2020). 

https://focusmalaysia.my/much-ado-about-tesla-1/