Why Singapore fits in with Dyson's electric dream

The Dyson company, founded and owned by entrepreneur James Dyson (left), said the decision to build an electric car plant in Singapore was based on a host of reasons, from supply chains, access to markets and the availability of expertise. The factor
The Dyson company, founded and owned by entrepreneur James Dyson, said the decision to build an electric car plant in Singapore was based on a host of reasons, from supply chains, access to markets and the availability of expertise. The factory is scheduled for completion in 2020.PHOTO: AGENCE FRANCE-PRESSE

When billionaire James Dyson, the British inventor of the bagless vacuum cleaner, unveiled a plan to build an electric car plant in Singapore, it raised a few eyebrows.

Apart from the shortage of land, Singapore has some of the highest average salaries in the world and it has been nearly 40 years since Ford closed its factory here, effectively ending car production on the island.

"It is a bit of a surprise because of the cost base and no other car manufacturing plant being here," said Mr Shantanu Majumdar, a regional director at consultancy JD Power.

Dyson management said on Tuesday the decision was based on supply chains, access to markets and the availability of expertise, which offset the cost factor.

But what other factors could have influenced the decision? Why not head straight to the biggest electric vehicle market in the world, China, like rival Tesla?

Here is a look at some of the less obvious pros and cons:

HIGH COSTS V GENEROUS INCENTIVES

Compared with other global cities, Singapore has some of the highest average salaries in the world after tax, according to studies by Deutsche Bank.

Land available for industrial use is scarce and expensive, and the nation ranks highly in general cost-of-living indexes.

But aside from its skilled engineers and scientists, Singapore offers generous incentive schemes for a high-tech firm like Dyson.

Some schemes include tax breaks for five years, which can be extended, and grants that can cover up to 30 per cent of the cost of projects to improve efficiency. Officials declined to comment on whether Dyson benefited from any such schemes.

Singapore has tried to shore up productivity in its manufacturing sector by focusing efforts on attracting high-end firms and those that adopt automated processes.

SMALL MARKET V CHINA GATEWAY

Dyson may have decided to make electric cars in Singapore, but few are likely to be driven here or anywhere in South-east Asia for that matter. The number of privately owned electric vehicles here is in single digits, and Tesla boss Elon Musk has criticised the Government for not being supportive of such vehicles.

In the broader South-east Asia, only 142 electric vehicles are forecast to be sold this year, data from consultant LMC Automotive shows.

By contrast, sales in China are forecast to almost reach 700,000 vehicles this year, more than double the combined sales from the United States and Europe.

But with one of the world's busiest ports, Dyson can roll a car off the production line here and within the hour, it can be on its way to China or other electric vehicle markets like South Korea or Japan.

Dyson products - which also include bladeless fans, air purifiers and hair dryers - are becoming a premium brand in China and other Asian markets.

Asia accounted for more than 70 per cent of its growth last year, the firm said.

FAMILIARITY V NEW FRONTIER

Dyson's history with Singapore probably also played a role.

It already employs 1,100 people here, making 21 million digital electric motors a year. It also has manufacturing hubs in Malaysia and the Philippines.

"Since Singapore is at the heart of South-east Asia, Dyson would be best placed to source many components from neighbouring countries and, locally, assemble and manufacture the high-tech car here," said a corporate banker who deals with multinational firms in the region.

Another option for Dyson could have been to follow rival Tesla to the biggest market, China.

By the time Dyson's first car is ready in 2021, Tesla may already be selling locally produced cars in China after it signed a deal with the Shanghai government for an 860,000 sq m site to build its first overseas gigafactory.

But China is becoming a crowded market for making electric vehicles and the government is reining in subsidies.

Meanwhile, Singapore does have an extensive free trade agreement with China that lists various car types and car parts in its tariff-reduction schedule.

The Economic Development Board did not immediately respond to a request for comment on whether electric vehicles would be eligible for such exemptions.

Mr Majumdar said intellectual property would be another consideration for Dyson: "Intellectual protections are very strong in Singapore. When you are in China... you may not be so comfortable."

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 26, 2018, with the headline 'Why Singapore fits in with Dyson's electric dream'. Print Edition | Subscribe