As competition heats up in Southeast Asia, Malaysia is focusing on a bigger part of its electric vehicle supply chain business. Tesla‘s announcement of its regional headquarters in Malaysia.
“Home is our priority,” Malaysian Prime Minister Anwar Ibrahim told CNBC’s Martin Soong in an exclusive interview Friday at the prime minister’s offices in Putrajaya, south of the country’s capital, Kuala Lumpur.
Tesla’s groundbreaking move with Malaysia strengthens its position in Southeast Asia’s EV supply chain. first deal under the country’s Battery Electric Vehicle Global Leaders initiative.
The deal also presents an opportunity for the US automaker to expand into a new market as growth slows in China and its other key markets.
Under the terms of Tesla’s deal with Malaysia, the EV maker will be able to sell its Shanghai-made electric vehicles directly without any import tariffs or intermediary prices.
Tesla will also establish a regional headquarters and service center in Selangor equipped with advanced diagnostic tools and staffed with highly trained Tesla technicians.
Tesla users will finally have access to a network of charging stations in the country’s major metropolitan areas, with the first planned in downtown Kuala Lumpur.
Tesla also has plans to start EV battery production in Malaysia.
Anwar said Malaysia is open to more EV investments, including from Chinese automakers. Even if Chinese carmakers are “reluctant,” he said, “the opportunity will be open.”
He said there would be synergies when foreign companies like Tesla invest in Malaysia, adding that “it could benefit three or four local industries”.
Tesla exceptions
Malaysia has a long-standing Bumiputera policy that favors the indigenous population, including the majority Malay-Muslim community and non-Malay indigenous groups.
Foreign businesses starting in Malaysia are required to meet a minimum 30% shareholding by Bumiputeras, but Tesla is exempt from the capital rule.
“For me (Tesla deal) is as good as putting a 30% stake,” Anwar said in a special interview to be broadcast on the TV channel. CNBC Talk later this week.
“In fact, it comes back to economics in terms of real advantage — it’s better.”
After being sworn in as Malaysia’s 10th prime minister last year, Anwar has vowed to fight corruption and make “Malaysia for all Malaysians”, drawing criticism for wanting to abolish Bumiputera privileges.
Tesla Inc. during the unveiling of the company’s Model Y electric car in Kuala Lumpur, Malaysia, Thursday, July 20, 2023.
Bloomberg | Bloomberg | Getty Images
“It’s not a question of demolition, it’s a question of refocusing the areas that matter,” Anwar said.
“For example, we can’t talk about an affirmative action issue that goes from race-based to need-based—pure meritocracy.”
Stimulation of technical transfers
Tesla’s exemption from the 30% equity requirement is not the only time Malaysia has given such incentives.
“This is not new. There are exceptions… given for digital transformation, IT-related activities or investments,” the prime minister said. “We’ve done it in the past – very selective. So it’s not just about Elon Musk, I think it’s very much required in this country to have that confidence and participation from our players.”
Before Telsa’s announcement, it was a Chinese automaker Zhejiang Geely’s $10 million plan to expand its operations in Tanjong Malim in Perak state and the German chip maker Infineon TechnologiesA €5 billion ($5.46 billion) expansion of the Kulim waterworks in Kedah state.
As a result of the political stability brought to the table by Anwar’s government, he quickly expressed the increase in foreign investment.
Malaysia recorded lower net foreign direct investment inflows of 3.1 billion ringgit ($666.9 million) in the quarter ended June 30, compared with 12 billion ringgit in the previous quarter, official data showed.
“Incentives should be given,” said Anwar, “but in my opinion, training is more important than justice,” Anwar said.
“This is a transfer of technology – is there a readiness to continue the transfer, as well as to train our personnel and change conditions according to our current priorities?”
Building preparation
However, Anwar was hesitant to say that an all-electric vehicle assembly line is in the pipeline.
When asked if Malaysia intends to become an “end-game assembly” and move up the supply chain, he replied: “Well, it’s a bit early for me to do that.” “But what’s important is that we have the ability to produce the battery parts that are required in the car.”
Citing the example of a deepening partnership between Geely and Malaysia’s national car brand Proton over time, Anwar pointed to the current lack of preparation.
But Malaysia is already ready to produce EV batteries.
“Yes, understanding, of course, buy our batteries,” said Anwar. “And local production is cheaper. That’s the advantage.”
Meanwhile, neighboring Indonesia has been interested in Tesla for years, but it has yet to yield any tangible partnership with Elon Musk for its electric car ambitions.
Indonesia is “an important neighbor for us and (we) have a lot in common,” Anwar said.
“We work very well both in government and in the private sector. And I think we should be able to complement each other instead of being in a fiercely competitive game,” he told CNBC.
“This has been the spirit of my government’s series of talks with President Jokowi and has been continued by the industry.”