Published by BusinessToday & AstroAwani, image by BusinessToday.
Anwar-sceptics are at it again.
Apparently, this time around, Tesla’s decision to U-turn on its investment expansion plans serves only to expose Anwar’s “reckless” or “impetuous” style.
On August 7, it was reported that Tesla “abruptly” announced that it is abandoning its investment plans in Malaysia and Southeast Asia.
The news reports prompted the typical knee-jerk reaction from Anwar-sceptics with one trying to paint the impression that the rather unexpected announcement by Tesla showed the Prime Minister has been “rash in rushing to conclusion”.
This naysayer even went so far as to accuse Anwar of jumping the gun for political mileage.
All in all, Anwar-critics are trying to imply that this is typical/symptomatic of the Prime Minister – as (part of) the (overall) narrative.
Let us look at the facts.
Firstly, on the ecosystem.
From the original Pakatan Harapan (PH) administration onwards until present-day Malaysia MADANI, the domestic electric vehicle (EV) ecosystem has seen the approval of 58 investment projects totalling RM26.2 billion from 2018 to Q1 2023, covering vehicle assembly, manufacturing of parts and charging components.
To date, the country has more than 2000 charging stations and envisages another 10,000 across the country by 2025.
Secondly, regarding Tesla’s investments in Malaysia.
According to the Malaysian Investment Development Authority (MIDA), when Tesla made its announcement in July 2023, it was in response to the Battery Electric Vehicle (BEV) Global Leaders initiative introduced by the Ministry of Investment, Trade and Industry or MITI (“Tesla to Invest in Malaysia, Boosting The Country’s Sustainable Mobility and Economic Growth”, MIDA, July 20, 2023).
Under the BEV Global Leaders initiative scheme, requirements are imposed on Tesla to facilitate its entry into the Malaysian market (“Tesla breaks new ground in Malaysia”, MIDA, March 6, 2023).
In return, Tesla was allowed to import its BEVs into Malaysia without obtaining the usual Approved Permit or AP.
Notice too that this has the potential to break the oligopoly of the existing (bumiputera) AP holders as importers of Tesla-made EV marques (of more than one year old) in terms of intra-market preference. This is because Tesla is now importing its brand new, cutting-edge lineup of Model 3 and Model Y into the Malaysian market.
The move is seen as a strategic attempt to disrupt the pre-existing business cartels in the market (“Commentary: PM Anwar rattles Malaysia’s business elite with his wooing of Tesla”, Leslie Lopez, CNA, August 11, 2003).
According to MIDA, Tesla aims to cater to the diverse needs and preferences of the Malaysian market with more of its models to be introduced in addition to the two mentioned.
In exchange for the AP waiver, Tesla would agree to comply with the following conditions within three years (“Here are the Miti requirements that Tesla Malaysia has fulfilled so far”, Malay Mail, August 11, 2024; refer also to the BEV Guidelines for AP Global Leaders, MITI – period of execution is from January 1, 2023 to December 31, 2025):
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- Establish a state-of-the-art 1) head office, and 2) sales and service outlet in Cyberjaya (“Tesla becomes latest EV company to see promise in Malaysia”, Nikkei Asia, July 20, 2023) which will serve as the central hub for all corporate operations, marketing, training, customer support activities and vehicle services equipped with advanced diagnostic tools and staffed with highly trained Tesla technicians to offer prompt and reliable after-sales services to customers.
The head office together with the sales and service outlet have already been up and running.
- Set up experience centres in key metropolitan areas, where customers can explore and experience the latest EV models firsthand. These centres will serve as interactive spaces for potential buyers to gain insights into the benefits of electric mobility and receive personalised assistance from knowledgeable Tesla sales representatives.
The pioneer or first experience centre has also been set up in Cyberjaya.
- Deploy at least 50 ultra-fast/superchargers with charging speed of over 180kW across strategic locations in the country.
Currently, there are 52 Tesla superchargers in operation throughout Peninsular Malaysia:
- 4 Superchargers – Tesla Service Centre Cyberjaya, Sunway Pyramid, Sunway Carnival Penang, Sunway Big Box Johor, Majlis Bandaraya Kuantan, IOI Mall Puchong, IOI City Mall Putrajaya, Freeport A’ Famosa Melaka;
- 6 Superchargers – Pavilion Bukit Jalil, Gamuda Cove; and
- 8 Superchargers – Pavilion KL
- Ensure at least 30 per cent of the ultra-fast/superchargers are open for non-Tesla EVs.
The deadline is 2025.
- Hire and develop at least 100 local skilled workers.
- Ensure that at least 80 per cent of the company’s full-time workforce are Malaysians.
According to MITI, Tesla has also fulfilled this requirement.
- Train at least 5 students from the local higher education institutes or technical and vocational education and training (TVET) centres per year via industrial internship.
- Cooperate with at least 10 local higher education institutes or TVET centres to transfer knowledge and skills in BEV, battery management EV system, EV charging and related fields.
According to MITI, Tesla is collaborating with the following 7 higher education institutions, namely University of Nottingham Malaysia, Multimedia University (MMU), Universiti Malaya (UM), UCSI, Sunway University, Universiti Teknologi Petronas (UTP), and Despark International College.
- Cooperate with at least 10 local companies to develop the ecosystem for EV charging. This includes using local contractors for charger deployment and equipment supplies.
By now, one will notice (or be reminded, whichever is the case) that the original requirements imposed on Tesla to invest in Malaysia never entailed setting up a factory and the concomitant commitment of running plant operations.
Tesla’s initial presence in Malaysia via Tesla Sdn Bhd was marked by making its website available for bookings and sales (“Tesla formally begins ops in Malaysia”, The Star, July 21, 2023). This was accompanied by the announcement of Tesla’s then first indoor supercharger station with a total of eight superchargers that was opened at the basement of Pavilion Kuala Lumpur.
As can be seen/verified from MIDA’s website (complemented and supplemented by MITI’s portal) and highlighted in the country’s media, there’s no mention whatsoever of a proposed plan to open a factory in Malaysia in the initial stage (of Tesla’s investment in Malaysia), i.e., in reference to the eight requirements or conditions.
Much of the initial stage of Tesla’s presence in Malaysia has gone according to plan.
For the record, the news reports – which actually originated from neighbouring Thailand (Malaysia’s regional rival and competitor) – regarding Tesla’s purported commitment in this particular respect came from anonymous and unofficial sources.
But the lack of commitment by Tesla in this particular respect can’t be emphasised strongly enough.
On the contrary, the proposed plan for Tesla’s strategic expansion via setting up a manufacturing base in Malaysia is (still) up for discussion.
There’s been no commitment (firm or otherwise) on the part of Tesla or any understanding on the part of MITI as to the (actual) sum to be poured in, the number of jobs to be created, etc.
As such, MITI hasn’t provided any guarantees and incentives to Tesla at all.
The specific proposals (for discussion) are as follows:
- Vehicle assembly;
- EV charger manufacturing;
- Assembly or manufacturing of critical components;
- Battery reuse, repair, recycle, or remanufacturing (4R) service; and
- Energy generation and storage technology.
These are highly technical and complex issues which involve virtually the reconfigurating of the entire supply chain (except for some imported parts – raw and semi-processed) to be localised in Malaysia – as well as within the wider Southeast Asia region.
It should also be noted that Tesla’s plan not only affects Malaysia but also Thailand and even Indonesia (“Tesla abandons EV factory plans in Southeast Asia, including Malaysia”, The Sun, August 7, 2024).
As explained by the Prime Minister himself, Tesla is facing losses and struggling to keep up with Chinese competitors (“PM: Report of Tesla scrapped factory plans in SE Asia due to losses and Chinese competition”, The Star, August 9, 2024; “Tesla struggling to keep up with Chinese EV manufacturers, says Anwar”, Free Malaysia Today, August 9, 2024).
The most prominent of the Chinese competitors would be BYD which has been ranked as the world’s leading manufacturer (2023), including in plug-in hybrid EVs, and has a presence in Malaysia.
It would seem then that Tesla has “suddenly’ had a sort of an “epiphany” regarding its actual market position and strength?
The question is: Why only now (i.e., the issue of timing)?
It’s clear that the answer to this mystery is best known by Tesla (“internal memo”) and no one else.
Hence, the accusation by Anwar-cynics that the Prime Minister’s hitherto announcement to much fanfare regarding Tesla’s grand investment plans is now “exposed” as premature and overly-optimistic, etc. is not only unfair but also downright disingenuous.
Not only were there no concrete plans to build manufacturing facilities in Malaysia, Tesla has not even had any discussions with MITI yet, as alluded to.
Needless to say, there has been no legally binding Memorandum of Agreement (MOA) in place. No Memorandum of Understanding (MOU) – of any sort – signed.
No Investment Guarantee Agreements (IGAs) entered into by MIDA – which represents a legally binding commitment by the government to protect foreign investment in the country.
According to MITI, discussions about the prospects of Tesla expanding its strategic presence into integrated manufacturing and assembly line operations would only commence by 2026 (i.e., only after the 3 years provided for meeting the 8 conditions or requirement as constituting the initial phase).
To reiterate, the topic/issue of opening a factory in Malaysia was never part of the initial stage of investment commitment by Tesla. Instead, it is an absolutely distinct or separate feature of the wider investment process into the future which is yet to be discussed, let alone finalised.
If any so-called “blame” (quote, unquote) is to be assigned, it should perhaps be directed at MITI for originally lacking that clarity regarding the initial phase.
Perhaps MITI should have anticipated that there would or might have been high hopes and expectations of such a commitment or intention (i.e., expanding into manufacturing and assembly line operations) by Tesla in the short-term generated from both the government’s and public enthusiasm surrounding the publicity.
At the very least, MITI should have been cognisant (not oblivious) that some or if not many Malaysians, excited or hyped up by news of Tesla’s investments in the country and lacking real-world and industry-specific insights, might have already expected a commitment towards the setting up of a factory here.
Be that as it may, it is very clear that the Prime Minister can’t be blamed for what is a purely commercial decision by Tesla and which involves no reneging on any commitment whatsoever, and whereby it’s not related to or caused by any fault or shortcoming on the part of MITI, MIDA or government policy.
For now, MITI shall be meeting with representatives of Tesla’s top management (from the US) on August 22 to clarify the company’s position on reversing/U-turning its intention to establish manufacturing and assembly facilities in the country (“Tengku Zafrul: Miti to meet Tesla this month to verify carmaker’s plan in Malaysia, amid rumours of it pausing regional plans”, Malay Mail, August 10, 2024).
Jason Loh Seong Wei is Head of Social, Law & Human Rights at EMIR Research, an independent think tank focussed on strategic policy recommendations based on rigorous research.
