In recent years, with the pace of development and transfer of the world's industry, many well-known companies have begun to move to places with cheaper labor costs, and Southeast Asia has become a favorite of the market for a while. How do we analyze it?
1. Tesla gave up building a factory in Southeast Asia?
According to the 21st Century Business Herald, in a race for emerging markets, Tesla chose to retreat.
According to Thailand sources, Tesla has canceled plans to build electric vehicle factories in Southeast Asia, and the original factory implementation team sent to Thailand has withdrawn, and is currently only considering building charging piles and other infrastructure locally. With the exception of China, United States and Germany, Tesla will not build new gigafactories in Thailand, Malaysia, Indonesia or anywhere else.
Soon, this information was confirmed by the Malaysia leadership. Malaysia Prime Minister Anwar Ibrahim responded that Tesla's decision to postpone its expansion plans in Malaysia is not because Malaysia is not performing well, but because of the fierce competition between Tesla and Chinese car companies. Malaysia's Minister of Investment, Trade and Industry Zafur also said that Tesla's decision to stop the factory plan is because they have lost market orders and are difficult to compete with Chinese car companies, but Tesla's withdrawal will not have a substantial impact on Malaysia.
According to market research firm Counterpoint Research, in the second quarter of 2023, the total sales of electric vehicles in the Southeast Asian market soared by 894% year-on-year, the highest in the world. In the first quarter of this year, sales of gasoline-powered vehicles in Southeast Asia fell by 7%, but sales of electric vehicles doubled compared to the same period last year. Under the dazzling growth rate, Tesla naturally covets the cake of emerging markets in Southeast Asia.
According to the Global Times, at present, Tesla has four vehicle factories around the world, located in Shanghai, China, Berlin, Germany, Austin, Texas, United States, and Fremont, California. In August 2022, Musk announced that he wanted to set up 10 to 12 "gigafactories" around the world. Malaysia, Thailand and Indonesia are all actively seeking Tesla to settle down.
"Southeast Asia had high hopes for Tesla's 'gigafactory' to build a local 'gigafactory' because billions of dollars of investment will greatly boost the development of local manufacturing and electric vehicles." The South China Morning Post reported that before Tesla's strategic shift, Thailand Prime Minister Saita and Malaysia Prime Minister Anwar Ibrahim had both held talks with Musk. Musk said last year that he was interested in the Malaysia market and intended to bring Tesla and other companies to the country. In order to attract Tesla, Malaysia abandoned its long-standing joint venture policy and allowed Tesla to enter the market independently.
On the other hand, Thailand has also managed to win over Tesla in the past period. In December last year, Thailand Prime Minister Saita personally took Tesla executives on a tour of three industrial zones in Thailand and expressed confidence that Tesla would invest in Thailand's entire electric vehicle supply chain, thereby creating a large number of jobs.
2. What is Tesla's purpose in doing this?
In recent years, various well-known manufacturing companies have turned to Southeast Asia to build factories to seek lower costs and higher profits, which has almost become a norm in the market, but Tesla is doing the opposite, what is going on?
First of all, industrial transfer under economic globalization is the norm in the current market. In the wave of economic globalization, it has become a common operation strategy for multinational companies to deploy production lines to emerging markets. With the continuous development and growth of enterprises, the labor costs and prices of production factors in the original production areas have gradually risen, which has squeezed the profit margins of enterprises. In order to reduce production costs and improve the competitiveness of enterprises, industrial transfer has become an inevitable choice for many enterprises. Southeast Asia, with its low labor costs and abundant natural resources, has become a popular destination for many enterprises to relocate their industries.
From the perspective of economic development, industrial transfer is an inevitable trend. With the development of a country's or region's economy, the price of production factors such as labor costs and land prices will inevitably rise. For companies, in order to remain competitive, they need to find lower cost production locations. Labor costs in Southeast Asia are relatively low, which makes them attractive for labor-intensive industries. In addition, Southeast Asia is also rich in natural resources, such as oil, natural gas, rubber, etc., which also facilitates the production of enterprises. With labor costs rising in regions such as China, shifting to regions such as Southeast Asia seems to be a natural option to reduce costs.
Secondly, the special situation of the Southeast Asian market is actually the reason why Tesla gave up. When we carefully study the various materials about the manufacturing industry in Southeast Asia over the years, we will find that Southeast Asia is not the feng shui treasure that everyone imagines, and we will find that Tesla does not seem to be so suitable for Southeast Asia:
First, Southeast Asia's purchasing power is insufficient, but competition has become fierce. Although there are many opportunities in the current Southeast Asian market, the level of local purchasing power has not yet risen. Southeast Asia has a relatively low level of economic development, and most countries have low per capita incomes, which makes local consumers have limited purchasing power for high-end electric vehicles. As a high-end electric vehicle manufacturer, Tesla's products are relatively expensive, and sales in the Southeast Asian market may be limited to a certain extent.
In addition, the Southeast Asian market has become increasingly hot. In the race to change lanes of new energy, Chinese car companies have locked in the leading position in Southeast Asia. In the first quarter of this year, Chinese brands, represented by BYD, accounted for more than 70% of EV sales in Southeast Asia, according to a report by Counterpoint Research. The strong performance of Chinese automakers in the Southeast Asian market has made Tesla face fierce competition in the region. In this case, it is understandable that Tesla chose to be more cautious in the Southeast Asian market.
Second, Southeast Asia's industrial base and manufacturing capacity are not so good. Although labor is cheap in Southeast Asia, the level of education of the local labor force is uneven, which can affect the productivity and product quality of enterprises. As a high-tech enterprise, Tesla has high requirements for the quality and technical level of the workforce. In Southeast Asia, it is not always possible to find a sufficient number of highly qualified laborers to meet their production needs.
In addition, there are certain shortcomings in the industrial base of Southeast Asia. Although Southeast Asia has a certain foundation in some traditional manufacturing fields, the industrial base in high-tech fields such as new energy vehicles is relatively weak. Tesla's construction of factories in Southeast Asia may require a lot of capital and resources to build and improve the local industrial base, which is a huge challenge for enterprises.
Third, the business environment in Southeast Asia is not so stable. The uncertainty of the business environment is also an important reason why Tesla abandoned the construction of factories in Southeast Asia. The political, economic and social environment in Southeast Asia is relatively unstable, and policy changes and uncertainties are greater. This can bring a lot of risk to the investment and production of the enterprise. For example, the governments of some Southeast Asian countries have frequent policy changes in taxation and land policies, which can easily affect the costs and profits of enterprises. In addition, the infrastructure construction of some Southeast Asian countries is relatively lagging behind, and problems in transportation and energy directly affect the operation of enterprises. Due to the uncertainty of the policy environment, the attractiveness of the Southeast Asian market has weakened for manufacturing companies looking for long-term stable development.
Third, Tesla's abandonment of building factories in Southeast Asia is not abandoning the market. For the current Tesla, its strategic adjustment to temporarily abandon the layout of Southeast Asia does not mean a comprehensive retreat or abandonment of the Southeast Asian market, but a deliberate decision-making process. On the one hand, this decision reflects Tesla's high level of caution at the manufacturing level. Against the backdrop of increasingly competitive global EV markets, Tesla needs to ensure that every investment delivers the maximum benefit and return. Therefore, the temporary shelving of the direct layout in Southeast Asia is due to the comprehensive consideration of various factors such as cost control, supply chain stability and production efficiency.
On the other hand, Tesla's huge manufacturing base in Shanghai, China, provides it with strong backing and flexibility. The base not only has sufficient production capacity, but also relies on China's well-established industrial system and supply chain network, which can quickly respond to changes in market demand and achieve efficient production. What's more, as market demand grows, Tesla can easily scale up the capacity of its Shanghai factory to meet market demand in a wider region, including Southeast Asia. This flexibility and scalability allows Tesla to maintain its focus on the Southeast Asian market without having to rush to make a large direct investment in the region.
It can be said that Tesla's globalization strategy is comprehensive and long-term, and it is not limited to the short-term gains and losses of one or several markets. Through intensive cultivation in key regions such as China, Tesla has not only consolidated its market position, but also accumulated rich experience in international operations. This experience is also valuable for the Southeast Asian market that may be entered in the future. Therefore, even if it fails to directly deploy in the Southeast Asian market for the time being, Tesla is fully capable of entering the region with a more mature and stable attitude in the future.
Therefore, we can believe that Tesla's choice to temporarily abandon the direct layout of Southeast Asia is based on a deep insight into the development trend of the global electric vehicle market and accurate control of the optimal allocation of its own resources.