How Anwar convinced Elon Musk to set up HQ in Malaysia

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Musk’s investment in Malaysia is a big deal because it was competing in a three-way fight with Thailand and Indonesia to host Tesla’s manufacturing hub in Southeast Asia.

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Anwar Ibrahim has been telling everyone in the current six states election campaign about his success in getting electric vehicle company Tesla to set up its headquarters in Selangor, Malaysia. Of course, he did not bluff or lie, and there’s a reason why the prime minister was incredibly proud of his achievement. It will create thousands of job opportunities for the younger generation.

A month earlier (June), around 3,000 people queued up as early as 6am for a Tesla interview in Cyberjaya, the key city of the Multimedia Super Corridor (MSC) in the country. The walk-in interview for five positions – Sales Advisor/Inside Sales Advisor, Enterprise Sales Advisor, Delivery Advisor, Customer Support Specialist and Service Advisor – had attracted a huge number of job seekers.

Anwar wanted to send the message, especially to the ethnic Malay voters, that Tesla’s decision to set up its Malaysian headquarters was due to political stability brought by the “Unity Government”. He would not miss the opportunity during the FELDA (Federal Land Development Authority) events, telling Malay settlers how billionaire Elon Musk had reached out to him for a meeting.

It wasn’t hard for him to impress his audience. First, he told the villagers that Elon Musk is the richest person in the world. Next, Musk was so eager to meet Anwar that both met virtually using video conferencing. Third, not only the American billionaire agreed to invest in Malaysia but also to establish Malaysian HQ even without meeting Anwar in person.

At the same time, PM Anwar mocked the previous administrations – Mahathir, Muhyiddin and Sabri – for failing to attract foreign investments due to political chaos and instability. He ridiculed how the previous Perikatan Nasional government went to Musk’s office and asked him to visit Malaysia, only to be ignored. He quipped that even village heads held on to their positions longer than Mahathir, Muhyiddin or Sabri.

It was a clever speech to warn young Malay voters about the importance of political stability as key to ensuring investor confidence, which in turn will create job opportunities – not racial and religious rhetoric. In the same breath, the PM said political stability also meant having to be “friends” with other coalitions, referring to Barisan Nasional, unlike the arrogant power-hungry Perikatan Nasional.

So far, the opposition could only play dumb, pretending they didn’t hear about Tesla’s huge investment in the country. Unable to counter the Anwar-led unity government’s competence in managing the economy, opposition parties Bersatu (Malaysian United Indigenous Party) and Malaysian Islamic Party (PAS – Parti Islam Se-Malaysia) could only spew racial and religious hatred and truckloads of lies.

In actuality, Tesla was a done deal as early as March 2023 when Investment, Trade and Industry Minister Tengku Zafrul announced Tesla’s plan to set up its base. The prime minister deliberately waited till the six states were dissolved so that he can use it to compare his administration and the previous regime’s cluelessness and incompetence.

Musk’s investment in Malaysia is a big deal because it was competing in a three-way fight with Thailand and Indonesia to host the US electric vehicle manufacturer’s manufacturing hub in Southeast Asia. While Tesla has established a distribution channel in Thailand as part of its expansion in ASEAN, Indonesia was the most aggressive competitor in the attempts to win Tesla’s investment.

Both Thailand and Indonesia were offering different value propositions to Elon Musk, the wealthiest person in the world with an estimated net worth of US$239 billion as of July 2023. Thailand has offered “EV subsidy program” – EV tax incentives including excise, import and road tax reduction. Indonesia’s offer was a concession to mine nickel, a key ingredient in lithium-ion battery cells.

In fact, Indonesia was so aggressive that immediately after the non-productive ASEAN leaders meeting with President Joe Biden in Washington in May 2022, President Joko “Jokowi” Widodo took the initiative to meet with Tesla CEO Musk at the SpaceX launch site in Texas. They discussed the potential investments and technology amid speculation that Tesla may choose Indonesia as its base in Asia.

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Indonesia holds the world’s largest nickel reserve with up to 25% global share, and Jokowi was leveraging on the country’s resources to lure Tesla to develop the domestic nickel industry, as well as to supply batteries for EV (electric vehicles) and even assemble electric vehicles at home. The country has been trying for years to secure a deal with Tesla on battery investment.

But Indonesia’s value proposition was not merely nickel. Jokowi tried to convince Musk with a proposal to deliver a secure and long-term supply of other raw materials like cobalt, a key ingredient to make lithium batteries. As a one-stop solution, the country could also deliver alumina, tin, graphite, manganese and even rare earth “Monazite”. Heck, Jokowi even tried his luck to convince Musk to set up a rocket launch pad there.

Other incentives offered by Indonesia included tax breaks and a subsidy scheme for electric vehicle purchases to build a market for Tesla in the country. Jokowi appeared to be winning the deal back then as neighbouring Malaysia, also lobbying for Tesla to open a plant, was in political chaos under the clueless and incompetent backdoor PM Muhyiddin Yassin and un-elected PM Ismail Sabri.

Today, as Malaysian 10th Prime Minister Anwar Ibrahim celebrates with his trophy, Indonesia was left speechless. Indonesian Minister of Maritime and Investment Affairs Luhut Binsar Pandjaitan said that he will meet Elon Musk on August 2, 2023, apparently to ask about Tesla’s plan to invest in Indonesia. He also claimed that Tesla’s investment in Malaysia is not a done deal.

Humiliated and with egg all over his face, Pandjaitan was absolutely annoyed as he believed the Tesla boss had played him. So, how did Malaysia snatch Tesla from Indonesia in the first place? Indonesia might have the advantage of large nickel reserves and a larger population than Malaysia. However, Malaysia is a mature auto industry and continues to be an attractive base for global automotive manufacturers.

With a sales volume of about 500,000 motor vehicles, the Malaysian automotive industry is the third biggest among other ASEAN countries, after Indonesia and Thailand. Crucially, Tesla is allowed to bypass traditional dealership systems, reducing costs and streamlining the sales process. Tesla’s Direct-to-Consumer (D2C) model means bypassing the requirement of franchised Approved Permits (AP).

Selangor Chief Minister has already announced that the locations in Petaling Regency and Sepang are ready for a Tesla factory. Brands like Toyota, Nissan, Honda, Volvo, Porsche, BMW and Mercedes-Benz already operate in the state. More importantly, unlike Indonesia, Malaysia doesn’t insist that investors like Tesla must have local partners.

Elon Musk was not impressed with the Indonesian government’s requirement for foreign investors to partner with the state-owned Indonesia Battery Corporation (IBC) in manufacturing EV batteries. Musk was only interested in nickel production whilst Indonesia wanted to develop a full supply chain – from extraction, and processing to making batteries for electric vehicles.

On top of political stability, Tesla’s decision to invest in Malaysia was due to the country’s strong electrical and electronics (E&E) ecosystem to support the manufacture of electric vehicles (EVs). Additionally, Malaysia has a higher per capita income, the recipe for higher EV sales and better road infrastructure. Still, it remains to be seen if Malaysia can become the EV automotive hub of the ASEAN market. – Finance Twitter