Netizens are expressing their frustration over the fact that luxury electric car brands like Tesla are exempt from taxes and duties, supposedly ‘making wealthy Malaysians even wealthier’, while fuel-powered, more affordable cars like the Perodua Axia are subject to high-er taxes, inadvertently burdening the less fortunate segments of the Malaysian population.
Questions about the environment are allegedly fairly important with electric cars (EVs). When their batteries reach the end of their useful lives, they will compound the already existing environmental concerns.
It seemed surprising that when the Prime Minister/Finance Minister presented Budget 2023 yesterday, there was no mention of any matters related to the auto industry. In particular, the auto industry was waiting to hear about the extension of the tax-exemption for electric vehicles (EVs) which had been proposed in October. Back then, the proposed Budget 2023 by the previous government had extended the exemption for CBU (completely-built-up) EVs for one more year, ie till the end of 2024. However, as the Budget was not tabled in Parliament, it was not confirmed which is why we had the new one presented yesterday.
The Finance Ministry, through its website, had also posted information regarding this matter as part of the revised Budget 2023 Touchpoints and it’s good news. The exemption of excise and import duties for EVs imported in CBU form will continue till the end of 2025. For companies that assemble EVs locally, the exemptions will be provided till the end of 2027, along with full import duty exemption for components used in the assembly of the EV models. Incidentally, EVs in this case refers only to battery electric vehicles and fuel-cell electric vehicles and not electrified vehicles such as hybrid (HEV) or plug-in hybrid vehicles (PHEVs), for which there are other incentives given.
New vehicle prices in Malaysia are high due to the high tax rates imposed and because taxes from vehicle sales contribute such a huge amount of revenue, the government has never been able to bring itself to lower tax rates. However, as part of the national recovery plan to boost the nation’s economy after the depression caused by the COVID-19 lockdowns, sales tax was exempted to lower purchase costs.
As always, being able to sell cars at lower prices helps, and the the exemption was initially given from mid-June 2020 to the end of that year. The lowered prices attracted many to buy new vehicles, in spite of uncertainties about the future due to the pandemic. The brisk sales certainly helped the car companies in their recovery and it was hoped that the exemption could be extended a bit longer.
The Finance Ministry agreed and gave another 6-month extension to the end of June, 2021. The exemption applied to vehicles assembled locally as well as those imported in CBU (Completed Built-Up) form. The former would get full exemption of sales tax which is 10%, while the CBU models would qualify for half the exemption, ie 5%. However, the exemption was not applicable to commercial vehicles and pick-ups.
Appeals by the Malaysian Automotive Association (MAA) for a further extension saw the Finance Ministry allowing another period of exemption till the end of 2021. While demand remained high, the industry was hit by the global microprocessor shortage which affected production of vehicles, and the industry asked for another extension as it was still recovering. The Finance Ministry was again agreeable, allowing the extension to the end of June 2022.
RM4.7 billion tax not collected
To date, a total of 868,422 units of vehicles have been sold (during the period of sales tax exemption) and the government has sacrificed RM4.7 billion of taxes, according to the Finance Ministry.
In the past month, the industry has been hopeful that the government will again extend the exemption till the end of 2022. But this time, it looks like the expiry date will not change. The government believes that with the opening of the economic sector, the automotive sector has returned to normal operations.
It does recognise that there are supply issues due to the microchip shortage that prevents vehicles from being completed, and therefore there is a backlog of orders to be met. Many who have made bookings months ago are concerned that they will not enjoy the lower prices with tax exempted if their vehicle is not delivered and registered by the last day of this month. The Finance Ministry is aware that at least 264,000 vehicles already ordered during the exemption period have not been delivered to buyers due to not being available.
The global shortage of microprocessors used in vehicle electronic systems has affected production and there is a shortage of vehicles for delivery.
Register vehicle by March 2023
As a compromise, while the government will not extend the exemption period, it will allow those who have booked new vehicles up till June 30, 2022 to have the exemption even if their vehicle is not delivered yet. They must however register the new vehicle with JPJ by March 31, 2023, which should be enough time for delivery.
“The extension of the vehicle registration period is a mid-point solution to balance the interests of consumers and national tax revenue that needs to be increased post-pandemic to ensure the welfare of the people and the country’s economic well-being continue to be preserved,” said Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz.
So if you thought that because there’s a long backlog of orders for the vehicle you want to buy and there is no point booking now, if you do so before the end of the month, you will still enjoy the lower price with sales tax exemption.
Hyundai-Sime Darby Motors (HSDM) has been quick to respond to the exemption of all import and excise duties for electric vehicles (EVs) announced just last Friday by the government for the proposed 2022 Budget. The exemption will certainly make fully electric vehicles more affordable, hopefully spurring interest among Malaysians to switch to them.
The Kona Electric has a different front end from the version with a combustion engine (below) as there is no need for the traditional grille since there is no radiator to cool.
More attractive pricing without taxes
Later this month, HSDM will begin selling the Hyundai Kona Electric, the fully electric version of the Kona SUV already sold in Malaysia since April this year. With the exemptions (normally a privilege given to royalty and diplomats), the model is expected to cost less than RM150,000 in standard form. This compares favourably with the version using a 2-litre Smartstream petrol engine that are priced at RM119,888 and RM136,888 (without insurance and 50% exemption on sales tax).
Customers will have a choice of two lithium-ion battery packs (at different prices, of course). The more powerful one will have storage capacity of 64 kWh for longer range while the alternative pack will have 39.2 kWh. With a fully charged pack, range claims are 484 kms and 305 kms, respectively, although this would depend on driving style and conditions, just like with combustion engines.
47 minutes recharging time
What would be of more importance to owners would be recharging time, something which will have to be a daily practice – just like charging your phone overnight. Hyundai claims that it should take around 47 minutes to recharge from 10% to 80% using a 100kW direct current (DC) fast charger.
The Kona Electric also has an optional 11-kW 3-phase on-board charger. This allows for significantly shorter charging times using public 3-phase AC charging stations or with a private compatible wall box at home. Drivers also have the option of charging their car at a compatible regular household power socket using the ICCB-cable (in-cable control box).
Things to consider buying an EV
Owning an EV will have to be carefully considered by those interested in having such vehicles. While you will certainly save on fuel costs and help save the planet, your personal circumstances will be a factor. If you live in a condo complex or apartments, you may not have a place to recharge your vehicle if the property owner does not provide convenient power points. Then you will have to rely on public recharging stations which, at this time, are not exactly plentiful. The situation will change in coming years, but it cannot be predicted how fast the private sector will develop the recharging network.
Visually, the Kona Electric resembles the other versions but has its own bumper, wheel and headlight designs. The front end is also more ‘sealed’ since the traditional grille is not needed for cooling purposes.
The interior has a similar horizontal layout as the other versions with new ambient lighting. The instrumentation reflects the EV-nature of the vehicle, with the tachometer space occupied by a meter showing the battery charge and power levels. There’s also a gauge to let the driver know how much range is left with the energy in the battery pack.
Performance-wise, the electric motor of the Kona Electric can generate 150 kW (equivalent to 204 ps) of power and 395 Nm of torque. You don’t get the sub-5 second times that you often read about with EVs, but it can go from 0 to 100 km/h in a claimed 7.9 seconds. The strong point about EVs is that all the torque is available from standstill so acceleration is exceptionally quick.
The Kona Electric is one of the early models in the growing range of EVs by Hyundai. The Korean carmaker plans to introduce 12 new fully electric models by 2025 and reach a sales volume of 560,000 EVs annually. Its entire line-up will be electrified globally by 2040, by which time it expects to capture 8% to 10% of the global EV market.
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