We attended Tesla Malaysia’s official launching of its best-selling all-electric Model Y sportsutility-vehicle, rolled out with much fanfare at Pavilion Kuala Lumpur yesterday. Competitively priced at RM199k to RM288k, we believe the famed EV is likely to be well received domestically. However, we do not expect it to pose a meaningful threat to the local automotive industry over the immediate term as >70% of vehicles sold locally carry a price tag of

Tesla out-pricing its competitors. We attended Tesla Malaysia’s official launching of its best-selling all-electric Model Y sports utility vehicle in Malaysia yesterday. It was crowded with EV enthusiasts, journalists and corporates eager to watch the official launching of the global brand. The Model Y is competitively priced against its closest competitors in the compact SUV segment (refer exhibit 1 and 2, excluding China-brand EVs) at RM199k-RM288k, with attractive driving range of 455km-533km, value-for-money vis-à-vis in comparison to Mazda MX-30 (RM198k with driving range of 199km), Hyundai Ioniq 5 (RM207k-RM270k with driving range of 430km), Kia EV 6 (RM319k with driving range of 514km-533km), Kia Niro (RM255k with driving range of 460km), Volvo XC40 & C40 Recharge (RM279k-RM289k with driving range of 533km), BMW iX1 (RM286k with driving range of 440km) and Mercedes-Benz EQA 250 (RM297k with driving range of 496km).

The first delivery of Model Y is expected in 1QCY24 from its Shanghai Gigafactory with an estimated pre-booking units of >2k units, with up to 4k units per year (average waiting period about 6-8 months). Its next model to be launched is Tesla Model 3, which could be priced competitively at RM150k with a driving range of 438km. Maybank and AmBank are named as Tesla Malaysia's preferred financiers, offering special financing packages (green financing scheme), including preferential financing rates from as low as 1.98% under an accelerated repayment package with same-day approval (compared to ICEs financing rate at lowest 2.85%) and various complimentary services under Tesla Ensure package.

Model Y comes in three trims, consisting of Model Y (rear-wheel drive), Model Y Long Range and Model Y Performance. The standard range rear-wheel drive is covered by an eight-year/160,000 km battery and drive unit warranty, while the Long Range and Performance all-wheel-drive come with an eight-year/192,000 km battery and drive unit warranty, whichever comes first. In terms of interior, all three variants get black vegan leather interior (upgradable to black and white for RM5,000), a panoramic glass roof with UV and infrared protection, a 15-inch central touchscreen display, a dual wireless charger and four USB Type-C ports. Also, standard fit is a 13-speaker premium audio system with a subwoofer and two amplifiers, power-adjustable front seats, heated front/rear seats, heated steering and an AC system featuring a HEPA filter system with Bioweapon Defence Mode. In terms of storage, it has an 854-litre rear boot and a 117 litre ‘frunk’ (under the bonnet, where the engine in an ICE vehicle would be).

With ultra-responsive motors, it only takes 3.7 seconds for the Model Y Performance to accelerate from 0 to 100km per hour, with a range of up to 533 km per charge. Model Y comes with an all-glass roof, autopilot, active safety features, and a HEPA air filtration system. Online orders, with a non-refundable RM1,000 fee, began last week. Tesla doesn’t officially reveal its battery kWh sizes, preferring to differentiate by range instead. As for charging times, the Model Y, operating at peak efficiency of 250 kW, can charge up to 120 km in just five minutes with a Tesla Supercharger. For the latter, the first of the 10 Supercharger stations are planned so far for Malaysia - an eight-bay station located at Pavilion Kuala Lumpur, is set to begin operations in the near future. The network is ready, but is awaiting energy commission (ST) approval.

Tesla to boost EV-related technology transfer. Tesla's presence in Malaysia is expected to create skilled and betterpaying job opportunities for workers in the BEV segment and increase the participation of local companies in the Tesla ecosystem, both domestically and globally and further, to strategically leverage on Malaysia electrical and electronics ecosystem to make Malaysia the preferred investment destination for technology related to low-carbon mobility. Tesla Malaysia roadmap unveiled that a comprehensive development plan for experience centre, service and support, and charging infrastructure in the country, aimed at delivering a seamless Tesla ownership experience and building an EV “supercharger” network (currently 10 chargers with at least 50 Superchargers within 3 years and at least 30% usable by other brands). Tesla’s entry was facilitated by MITI through the battery electric vehicle (BEV) Global Leaders programme which is aimed at boosting local BEV demand. Tesla operates on a direct-to-consumer sales model without involving the use of dealers. All bookings are made online while Tesla experience centres function as physical showrooms and delivery centres.

ICE will still be in dominance. With more than 70% of automotive total industry volume (TIV) vehicles sold priced <RM100k, and close to 40% at <RM50k mark, it is still far from being an affordable price range to fully replace internal combustion engines (ICE) vehicles, despite the Tesla EVs’ attractive pricing, and low financing rate. From the lack of EV charging stations to the lack of a holistic strategy in building up a robust EV ecosystem, ICE will still be in dominance. Specifically, Perodua, which hold almost 50% of local industry TIV, will first focus on hybrid cars (expected to launch at <RM70k mark) to build up the local expertise and gradually transition vendors capacity towards localising the key components of EVs including battery, inverter and motor as it indicates that to launch an affordable EVs, there are need to have robust localised EV parts supply ecosystems. On the other hand, BAUTO indicate that they will monitor the development of EVs ecosystem closely in tandem with the national brands commitment and will compete with other EV brands by launching various new CBU model of EVs offerings such as Mazda MX-30, Kia EV6, Kia Niro EV and Peugeot e-2008 which are much newer model compared to Tesla Model Y.

Challenges in ramping up charging hubs. We believe the challenges faced in ramping up charging hubs could be a hindrance for potential buyers of electric vehicles looking for out-of-town long drive. Apart from financial support, Gentari has been able to ramp up its charging station installation capacity due to its access to the chain of Petronas stations owned by Petronas Dagangan nationwide, where it can readily put up charging points at strategic locations. However, there are speed bumps hampering the expansion of the charging network of which Gentari listed land acquisition, the tedious process of obtaining various local authorities’ approvals to set up a charging hub, and having sufficient energy to power up the charging points. Nevertheless, the underlying issue remains the lack of a holistic strategy in building up a robust EV ecosystem that will encourage the adoption of EVs, building up of technology and talent, and the related industries. While there are numerous issues to tackle before Malaysia can drive on the EV track, having enough charging points is the crucial first step.

There are only about 1,000 charging stations available at present, compared to the Ministry of International Trade and Industry (MITI) expectation of 4,000 charging points by the end of this year. Under the Low Carbon Mobility Blueprint 2021-2030, the government aims to install 10,000 public charging stations by 2025 (1,000 DC chargers, 9,000 AC chargers). The need for more charging stations is made more urgent with the increasing number of electrified vehicles registered in Malaysia. Currently, there are already more than 100,000 electrified vehicles which include over 10,000 EVs, 80,000 petrol-electric hybrid vehicles and 2,700 diesel-electric hybrids

Record year in CY22 poised to be repeated in CY23. We believe a new car is still an affordable luxury for most Malaysian households despite the high inflation and a slowing global economy. We maintain our CY23 TIV projection of 720k units that will match the record level achieved in CY22. Our optimism is underpinned by: (i) strong consumer confidence supported by a stable economy and a healthy job market, (ii) the affordability of motor vehicle underpinned by stable new car prices thanks to the deferment of new excise duty regulations (that could have resulted in prices of locally assembled vehicles increasing by 8%-20%) and potentially cheaper hire purchase cost with the introduction of reducing balance method in the calculation of interest charges, and (iii) attractive new models. Our projection is closely in-line with 725k units projected by Malaysian Automotive Association (MAA), which was recently revised upward from 650k units.

Our sector top picks are:

• MBMR for: (i) its strong earnings visibility backed by an order backlog of Perodua vehicles of 190k units (almost half of its CY23 target sales of 314k units), (ii) being a good proxy to the mass-market Perodua brand given that it is the largest dealer of Perodua vehicles in Malaysia, as well as its 22.58% stake in Perusahaan Otomobil Kedua Sdn Bhd, the producer of Perodua vehicles, and (iii) its attractive dividend yield of about 7%.
• BAUTO for: (i) its strong earnings visibility backed by an order backlog of 6.5k units for Mazda, Kia and Peugeot vehicles, (ii) its premium mid-market Mazda brand that offers the best of both worlds, i.e. products that appeal to the middle-income group and yet command superior margins than its peers in the mid-market segment, and (iii) its attractive dividend yield of about 8%.

Source: Kenanga Research - 21 Jul 2023