It’s not often that the auto industry gets what it asks for during Budget time but for Budget 2023, the Finance Ministry has at least given one more year (to the end of 2024) for the full duty exemption on battery electric vehicles (BEVs). Last year, the exemption period announced was only for 2022 and 2023, with an extension until the end of 2025 for those models which are assembled locally.
It’s not as long as what the car companies wish for but it’s probably better than nothing. The point is that while a number of companies are now importing BEVs, the sales numbers are not exactly big even if the vehicles are ‘affordable’. The prices of BEVs are still high, even without any tax imposed, and proper ones (we’re not talking about the cheap 2-seater minis from China) are still in the region of RM150,000.
Malaysia has long had national automotive policies which are intended to provide a ‘roadmap’ for the development and growth of the auto industry. Updated periodically, it is supposed to give a ‘roadmap’ for companies, especially carmakers, to plan ahead. Investments are often planned many years in advance so policies must be sufficiently long and more importantly, consistent.
In recent times, interest has been on how the government intends to phase in electric vehicles (EVs), in line with the global trend. With Europe, China and Japan putting pressure on electrification, some manufacturers have already declared that they will not only step up development of electrified models but will also stop selling vehicles with combustion engines by the end of this decade.
‘EV roadmaps’ already out in neighbouring countries
Neighbouring countries such as Thailand, Singapore and Indonesia have already provided their ‘roadmaps’ to the industry. The policies announced have provided sufficient information for the carmakers to plan their investments which will be considerable.
Malaysia has said it has an EV policy and will announce it in due course, so the industry waits. A clear policy coupled with incentives will certainly attract investments to supercharge EV adoption by the masses, according to industry players speaking at Maybank Kim Eng’s ‘The Rise of ASEAN EV’ webinar recently.
Clear timeliness will bring investments
Having clear timelines for EV adoption and phasing out of internal combustion engine vehicles (ICEVs), incentives for EVs and also introducing disincentives for ICEVs will increase the demand for EVs. Investments will follow suit, including those for building the charging infrastructure and stability of power supply.
Car companies like Edaran Tan Chong Motor have used their own money to try to create more awareness of EVs. In 2012, when the government allowed short-term duty-exemption on electrifed vehicles, the company introduced the LEAF EV. But without incentives to offset the high prices of the EVs, there was little interest when the exemption ended.
Citing Norway’s experience, Eirik Barclay, Group Executive Vice-President, New Ventures and Technology, Yinson Holdings, said that there was never a subsidy for EVs. Instead, the government increased taxes on ICEVs and fuel. This also meant that the government did not lose revenue. He believes that these measures, and the removal of fuel subsidies, will result in consumers choosing EVs over ICEVs due to cost of ownership.
Comprehensive charging infrastructure needed
Range anxiety remains a concern among consumers, this referring to the distance that can be travelled on a fully charged battery pack before it needs to be recharged. However, studies have found that most do not usually drive more than 100 kms on a typical day and most of today’s mass-produced EVs can already provide that range and more. This concern can be mitigated with a charging infrastructure that is well planned and comprehensive.
A comprehensive and widespread network of charging stations is necessary to make Malaysian comfortable owning electric vehicles.
Lee Yuen How, Director, EV Connection Sdn Bhd said that all stakeholders such as automakers, oil and gas companies, utility companies, chargepoint operators, and the government should work together to build the infrastructure.
“If you leave it to the private sector, they will only build the charging infrastructure where there are high concentrations of EV users, leaving the semi-urban and rural areas to become an ‘EV-charging desert’. Therefore, the government plays an important role in ensuring investment across all areas,” he added.
Responsibility for used batteries
Jinsi Lee, Founder & CEO of Oyika, advocates a separation between the battery pack and the electric vehicle for environmental and regulatory benefits. “The party that sells the vehicle must be responsible for the battery across its entire lifecycle, instead of transferring ownership to the vehicle buyer. The seller will be required to take the battery pack back, recycle it and reuse it as second-life storage, decommission it and so on,” he said.
“From a consumer’s point of view, if the battery pack is leased, then one can buy a second-hand EV and still get the latest battery technology. We are doing this for motorbikes and I don’t see why we can’t do it for vans, trucks and cars,” he added.
Maybank Kim Eng Research predicts that sales of EVs will reach parity with ICEVs by 2030, driven by the global carbon neutrality agenda and millennial consumer preferences, among others. Malaysia and the Philippines are the slow ones in the EV race in ASEAN. Malaysia’s Low Carbon Mobility Blueprint is an important catalyst; however more focus should be on battery EVs (running only on electricity) instead of plug-in or hybrid EVs to be fully on the carbon neutrality agenda.
During the webinar, it was also suggested that ASEAN should look at China and pure-EV companies for partnerships and investment, and pursue green technology such as hydrogen at the same time.
The National Vaccination Program in Malaysia is free of charge.
Sales of new vehicles will not require payment of Sales Tax this year. For models that are assembled locally (CKD), the exemption will be 100% while for imported (CBU) models, the exemption will be 50%.
These are incentives which the Prime Minister today announced as part of the Short-Term Economic Recovery Plan. The plan has 40 iniatives totalling RM35 billion and the tax exemptions for the auto industry are for the period from June 15 until December 31, 2020.
Sales tax is set at 10% so purchasers of locally-assembled models will not have to pay that entire amount, while those who buy CBU models will have to pay half of the sales tax that would be payable. The revisions should be quite straightforward although the car companies will now have to accept that people will hold back their purchases for another 10 days.
Among the first in the industry to comment on the development, UMW Toyota Motor’s President, Ravindran K. said: “This is indeed good news for the auto industry and we are grateful to the government for assisting this sector. The full savings will be passed on to customers and we expect that the reduced prices will help to revitalize the automotive industry.”
Mr. Ravindran said that the company already has new models planned for launch this year. “With the tax exemptions, we will be making the relevant adjustments to the retail prices of all our models and apply them by June 15,” he added.
“The Malaysian auto industry, like those in other countries, has been greatly affected by the long period of inactivity during the Movement Control Order period. Apart from lost sales and production, there is also consumer sentiment which is uncertain of the future. Therefore, we appreciate the support from the government to help boost the industry,” said Akio Takeyama,
Deputy Chairman of UMW Toyota Motor.
The effects of the COVID-19 pandemic have been very hard on virtually every industrial sector, not just in Malaysia but also in other countries. As the situation eases, governments are now looking at ways to help industries recover as quickly as possible so the economy can be revitalized.
The auto sector in Malaysia is no exception and the shutdown will have implications on the Total Industry Volume in 2020. The Malaysian Automotive Association (MAA) has given a forecast of 400,000 units.
Following a recent announcement by the Malaysia Automotive, Robotics and IoT Institute (MARii), Perodua has expressed its support for the government’s initiatives to sustain Malaysia’s automotive industry amidst the ongoing COVID-19 situation.
“Perodua is in full support of the government’s aim to fortify Malaysia’s automotive industry in these trying times, and its various initiatives to achieve that aim,” said Perodua President & CEO, Dato’ Zainal Abidin Ahmad.
“As Malaysia’s biggest carmaker by volume, we are eager and ready to step forward and work with the government to ensure the industry’s continued survival in this difficult time,” he added.
TIV needs to be 500,000 units
According to reports, MARii estimates a 28% drop in new car sales this year due to the Movement Control Order (MCO) brought about by COVID-19. It estimates that a minimum 500,000 units for the Total Industry Volume (TIV) would be needed in 2020 for automotive businesses’ continued survival.
According to the Malaysian Automotive Association (MAA) which compiles monthly sales report, the TIV up till the end of April was 106,601 units. This means that monthly sales for the remaining 8 months would have to be around 49,175 units to reach MARii’s figure.
Based on consultation with its members which are the various importers and distributors, the MAA has already revised its forecast downwards by 33% to 400,000 units from 600,000 units. That’s a TIV level almost similar to what was achieved 19 years ago in 2001
Incentives proposed to stimulate demand
Among the incentives MARii outlined to stimulate demand are a temporary waiver on downpayments, reduced loan interest rates and joint subsidies between carmakers and the government for roadtax and insurance for a limited period.
“It is indeed a challenging time for all of us. However, Perodua is confident that with the government’s collaboration, the industry as well as its ecosystem of suppliers and dealers will be able to weather the storm together,” Dato’ Zainal said.
As reported earlier, Perodua sold delivered 7,886 vehicles in May and a total of 52,920 vehicles during the first five months of 2020. This accounted for a 41% share of the market against an estimated January-May TIV of 129,401 units.
“Perodua is also doing its part to sustain its vast ecosystem of suppliers and dealers. Besides our volume, we assist and support them through investments, purchases and advance purchases, longer credit terms as well as various operational transformation initiatives and development programmes,” Dato’ Zainal added.
