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Malaysia was so eager to get Elon Musk to invest in the country, it waived its decades-old policies for Tesla

By Nicholas Gordon | Fortune Magazine | August 23, 2023

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Malaysia has achieved what many of its peers have failed to do: successfully enticing Elon Musk’s Tesla to establish a presence in the country.  Last month, the U.S. EV manufacturer agreed to set up a regional headquarters and service center near the capital Kuala Lumpur and invest in a local charging network.  The company also started selling its cars directly to Malaysian consumers, unique in a market where local middlemen still dominate.   Malaysia sees Tesla’s move as the first step towards capturing more of the increasingly lucrative EV supply chain.

Tesla is the first manufacturer to sell in Malaysia under the country’s Battery Electric Vehicles Global Leaders scheme, which provides special concessions to EV manufacturers.  Normally, foreign-made cars can only be sold through a local partner, and sellers must comply with Malaysia’s affirmative action policies towards the so-called bumiputera, members of the Malay majority and indigenous groups.  But Tesla, under Malaysia’s scheme, can sell directly to consumers without a local partner. Tesla is not the only Musk-led outfit to get an exemption. Malaysia has also granted SpaceX the right to operate its Starlink system in the country while being wholly foreign-owned, despite rules saying that internet providers could have a maximum of 49% foreign ownership.

Malaysia’s success in winning over Tesla is the latest move in an international race to woo the EV maker. 

Indonesia and its president, Joko Widodo, have lobbied Musk personally to set up operations in the large Southeast Asian country.   South Korea is also vying to host a Tesla factory, with president Yoon Seok-Yuel offering tax breaks to Musk during his state visit to Washington earlier this year.  Tesla has long hoped to sell cars in India, yet negotiations have stalled due to disagreements on waiving the country’s high import duties. Recently, government officials say that Tesla is now open to building a factory in India, after the company earlier said it wanted to sell cars first to test domestic appetite for EVs.  Italy, France and Spain have also expressed interest in hosting Tesla’s next European factory. 

Tesla currently has Gigafactories in the U.S., China and Germany, and is currently building a plant in Mexico.  Tesla is accustomed to special treatment from foreign governments. The carmaker was allowed to open its Gigafactory in Shanghai, China without a local partner, making it the first wholly-foreign-owned plant in the country. 

3 key takeaways from the article

1. Malaysia has achieved what many of its peers have failed to do: successfully enticing Elon Musk’s Tesla to establish a presence in the country.  Last month, the U.S. EV manufacturer agreed to set up a regional headquarters and service center near the capital Kuala Lumpur and invest in a local charging network.
2. Malaysia’s success in winning over Tesla is the latest move in an international race to woo the EV maker.  The other who successfuly negotiated such deals include India, Indonesia, South Korea, Spain, France, and Italy.
3. Tesla currently has Gigafactories in the U.S., China and Germany, and is currently building a plant in Mexico.  Tesla is accustomed to special treatment from foreign governments. The carmaker was allowed to open its Gigafactory in Shanghai, China without a local partner, making it the first wholly-foreign-owned plant in the country. 

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Topics:  Foreign Direct Investment, Tesla, Globalization