Tesla deal with Malaysia paves the way for EV investments in the country

The Tesla deal with Malaysia paves the way for investment in the country’s electric vehicle supply chain. The company has received an exemption from the share capital rule, and other investors in the sector could potentially receive it as well.

Tesla-Malaysia deal boosts EV development

Malaysia is vying for an important place in the electric vehicle supply chain as competition intensifies in Southeast Asia. After Tesla announced the establishment of a regional headquarters in Malaysia, the attractiveness of the country is growing. In addition, it stimulated the government to be even more welcoming to electric vehicles.

“EV happens to be our priority,” Malaysia’s Prime Minister Anwar Ibrahim told CNBC’s Martin Soong in an exclusive interview Friday.

The Tesla-Malaysia deal represents an opportunity for the American manufacturer to enter a new market. Under the terms of the agreement, the company will be able to sell its electric vehicles manufactured at Giga Shanghai without any import duties or intermediary markups. Tesla will also set up a regional headquarters and service center in Selangor. The minister is very happy to work with Tesla, saying that “it can benefit three or four local industries.”

Anwar said Malaysia is open to more investment in electric vehicles. He said their hospitality extends to Chinese manufacturers as well.

Malaysia activates exemptions for Tesla

As in China, Tesla received special treatment in Malaysia. The country has a longstanding Bumiputera policy. Foreign businesses starting operations in Malaysia are required to meet a minimum of 30% equity ownership by Bumiputeras. However, Tesla received an exception.

“To me, [the Tesla deal] is as good as putting a 30% equity,” Anwar said in an interview. “In fact, in terms of real advantage returns to the economy — that is better,” he added.

Several companies received special treatment

Tesla’s exemption from the 30% share capital requirement is not the only time Malaysia has provided such incentives. The country acts in this way for companies developing in certain areas.

“This is not new. There has been exceptions … given for digital transformation, for IT-related activities or investments,” the prime minister said. “We have done that in the past – very selective. So the issue’s not just Elon Musk, which I think is much required in this country to give this confidence and the participation of our players.”

Malaysia is open to cooperation with Indonesia

Another country in Southeast Asia, Indonesia, has been courting Tesla for several years now. It seems that some success has already been achieved, although the manufacturer has not yet made any official announcements. Indonesia is an “important neighbor to us and [we have] a lot in common,” Anwar said.

“We’re working very well together, both in government and the private sector. And I think instead of being in a game of fierce competition, we should be able to complement each other,” he said.

“That has been the spirit of my government’s series of conversations with President Jokowi and followed through by the industry.”

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