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Malaysia Backs Down on Tesla Deal

Malaysia Backs Down on 100 units Tesla Model S electric vehicle cancelled put on hold EV Geely Proton China AFP PHOTO / JOHANNES EISELE / AFP / JOHANNES EISELE

Here’s what (we think) we know

 

Less than 18 months after the Malaysian government announced that it wants to waive import duties on 100 Tesla electric cars in effort to promote electric vehicles (EVs), the project is now on hold, sources say.

At last count, only 16 Teslas had been brought in by Greentech Malaysia thus far, people familiar with the project informed this website.

From this figure, two were assigned to Greentech Malaysia but these cars are now off the roads and awaiting spare parts, sources familiar with the matter tell Motion Digest. At the time of writing, it is unclear why the project had been frozen.

 

Money saved?

Stopping the imports may be a good call for the government, given the costs involved. A Ministry of Energy, Green Technology and Water official says each Tesla Model S costs roughly RM300,000 duty-free, putting the cost of bringing in the remaining 83 units at a whopping RM24.9 million.

To recap, prime minister Datuk Seri Najib Tun Razak announced the 100-Tesla project in February 2016 following his visit to Tesla Motors Inc’s headquarters in Palo Alto, California.

“Malaysia has decided to promote electric vehicles under a special programme where the government will allow imports of 100 units of Model S, premium electric sedans. These cars have zero-emission. We would like to promote such cars in Malaysia,” he said.

Putting the project on hold may amount to taxpayer money saved, for now. The Teslas were meant to be offered to government-linked companies for lease to showcase the EVs and their benefits to the public.

While it is impossible to know for sure, there is a possibility the purchase funds may be redirected to more urgent expenditure to benefit more Malaysians directly, especially with the 14th general elections (GE14) around the corner.

 

Not conducive

One possible factor in the decision may be the as-yet not conducive environment in Malaysia for EVs. In a media briefing in March, Greentech Malaysia conceded that the biggest challenge in promoting electric vehicles is providing preferential treatment for EV purchase including via financial incentives.

Despite a national goal of having 100,000 electric cars, 100,000 electric scooters and 2,000 electric buses on local roads by 2030, Malaysia’s tax incentives for EVs are not conducive towards achieving the goal. Excise duty for fully imported EVs and hybrids range from 65% up to 100%.

Accommodative taxation for EVs, while very expensive if seen through the environmental perspective of reducing greenhouse gas emissions, is critical for promoting adoption of EVs. Case-in-point:  Tesla’s sales in Hong Kong came to a grinding halt in April as the end of a tax exemption increased the price tag from USD$75,000 to around USD$130,000.

Read Malaysia Launches Electric Bicycle Program for its Public Universities

 

Geely’s move

The postponement also comes at an interesting time. China’s Zhejiang Geely Holding Group, which in May announced the acquisition of a 49.9% stake in Malaysia’s national carmaker Proton Holdings Bhd, also has EV technology and capability under its belt.

According to the majority shareholder DRB-Hicom, Geely would take the lead in terms of production, manufacturing, sales and marketing post-acquisition while DRB-Hicom manages the distribution aspect.

Does the postponement of the Tesla EVs importation plan tie into the emergence of a global EV player like Geely in Proton? Either way, it would very likely signal exciting times ahead for Malaysia’s auto sector.

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