LETTER: In 2004, a 33-year-old IT expert who did not know anything about automobile engineering or manufacturing joined a small company, Tesla Motor, after listening to a talk about electric vehicles as the automobile of the future.
With investments from Google and Mercedes, Tesla Motors produced the Tesla Roadster prototype. In 2008, Tesla almost had no money to build the vehicles ordered by their clients.
But they managed to secure a US$465 million soft loan from the United States government in 2010, which gave strong confidence to venture capitalists to invest big in Tesla Motors before its listing in the New York Stock Exhange (NYSE). The rest is history.
Today, Tesla Motors, which became Tesla Inc in 2017, is the largest automotive company in the world with a market capitalisation of US$662 billion, three times bigger than Toyota, at one time the largest automotive company, and six times larger than the formerly second largest automotive company, VW Automotive Group.
Elon Musk, the emigrant from South Africa, as the largest shareholder of Tesla Inc, became the richest man in the world.
The success of wealth creation through return on investment (ROI) in electric vehicle manufacturing led to many emulating Musk and Tesla Inc and equally gaining success, including NIO, XPeng, Li Motor and, recently, Lucid Motors.
The ROI of 300 per cent to thousands of per cent have been well documented, such as 1,200 per cent for Saudi Public Investment Fund (PIF) investing in Lucid Motors and 3,000 per cent made by former Russian deputy minister Denis Sverdlov in an electric vehicle manufacturer.
To get ROI of thousands per cent, an investor needs to get into the early stage of EV manufacturing development, known as Round 1 investment.
Basically, this means investing in a company that has the capability to design, engineer and produce an electric vehicle prototype or in Round 2 investment, which is mass producing their electric vehicle prototype.
In the case of Lucid Motors and Saudi PIF, the fund invested simultaneously in Rounds 1 and 2 by investing US$2 billion, thus acquiring 67 per cent of Lucid Motors, valued at US$60 billion in the stock exchange even before it started manufacturing. This meant that Saudi PIF made a US$32.2 billion profit out of their investment of US$2 billion.
One comprehensive proposal document by a local company, MIMCO, has been presented to the Prime Minister's Department, last year.
By investing RM6 billion in our own start-up electric vehicle manufacturer, a government agency, such as Khazanah Nasional Bhd (KNB), would own a 70 per cent equity.
MIMCO's electric vehicle manufacturing would generate an annual revenue of RM16 billion.
Electric vehicle manufacturing would also bring in RM14 billion in investments from component vendors and create 25,000 direct and indirect jobs, similar to Hyundai's new electric vehicle manufacturing plant
in Indonesia.
Best of all, based on evaluations made by a financial advisory company, MIMCO would be valued at US$20 billion in an initial public offering on the NYSE. This means that KNB will make a RM50 billion profit from its investment of RM6 billion, even before MIMCO starts producing their first EV.
However, if the MIMCO proposal is taken up by a foreign country's sovereign wealth fund, like the Qatar Investment Authority, or by a foreign IT giant, like Apple or Google, it would be a great loss for us as it is a global trillion-dollar industry.
DR AMALINA AMIR
Innovative Electromobility
Research Lab head,
Faculty of Mechanical Engineering, Universiti Teknologi Mara
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times