As Malaysia is targeting to be a net-zero GHG emission country by 2050, RHB investment believes the focus for the auto sector will be on propelling EV uptake in Malaysia, where creating a wider EV ecosystem as well as incentives for EV adoption will take centre stage. This could include incentives for installing EV charging infrastructure, locally assembled EV incentives, and EV road tax reform.
Malaysia intends to have 10,000 charging stations in the country by 2025. However, as of late July, the charging station count is only close to 1,100. On top of that, the adoption of EVs is outpacing the country’s deployment of charging infrastructure, according to Gentari deputy CEO Shah Yang Razalli. Given the huge disparity between the current charging station count from its target, we anticipate the Government will be more aggressive in ensuring the 10,000 milestone is achieved.
Currently, incentives offered include 100% income tax exemption for EV charging equipment manufacturers for a period of 10 years starting from 2023 as well as 100% investment tax allowance for a period of five years. The Government could offer a more targeted stimulus such as providing grants to install shared EV charging stations at non-landed private residences, which is being implemented in Singapore.
There are a few incentives to spur original equipment manufacturers’ (OEM) local assembly of EVs in Malaysia, notably excise duty, sales tax, and import tax exemptions for components used in CKD EVs, up to the end of 2027. Not only that, one of the conditions for importing CBU EVs is they must not be priced below MYR100k until end-2025, as a move to protect the local automotive industry as well as to incentivise OEMs to produce their EVs locally. However, we have yet to see any locally assembled EVs that are priced below MYR100k. Therefore, the house believes Proton and Perodua will be carrying the responsibility of churning out affordable locally assembled EVs to the local market in the next few years. Proton is targeting to have its first EV on the road by 2025, while Perodua has not disclosed any target to roll out its own EV.
As such, RHB believes the incentives to further support the manufacturing and assembly of CKD EVs are on the table, in line with the Government’s vision for the Automotive Hi-Tech Valley to be the ASEAN hub for EV manufacturing and component supplies. If this gets delayed, we do not rule out the possibility of the MYR100k price tag floor on CBU EVs being extended
beyond 2025.
At present, EVs are exempted from road tax up until the Ministry of Transport is currently reviewing the EV road tax structure post-EV road tax exemption period to ensure that the road tax for EVs is cheaper than internal combustion engine (ICE) vehicles and to encourage people to purchase EVs even after the road tax holiday. While there is already a kilowatt-based road tax structure in place, the current system results in EV owners and prospective buyers having to pay more than if they were to own or purchase ICE vehicles. We expect the revised EV road tax structure to be finalised and announced in Budget 2024.
The Ministry of Investment, Trade and Industry (MITI) hopes for incentives that make EVs affordable to B40 and M40, through targeted subsidies and financial assistance. Since the subsidies are meant to assist people in the lower income bracket, RHB anticipates lower-priced EVs will be preferred by this segment over the luxury marques, such as Neta V, BYD Atto 3, BYD Dolphin, and Ora Good Cat which are priced between the MYR100k-150k level.
Assuming the Government offers subsidies amounting to 20% of the on-the-road (OTR) price, an EV car with a subsidised price tag of MYR80k (as the MYR100k floor applies) would still be deemed relatively expensive as there are cheaper petrol-powered options with much lower prices such as Perodua Myvi, Proton Persona or even a six-seater such as Proton Exora.
Not only that, the house thinks such a move would require the Government to fork out a huge sum of subsidy for every EV unit to ensure the consumption behaviour of the B40 and M40 groups shifts towards favouring EVs. Therefore, until production costs (including battery costs) reach a reasonably competitive level, RHB thinks EV penetration in the local market as a result of these incentives would be minimal considering the imposition of the MYR100k floor to CBU EV prices still applies and the absence of affordable locally assembled CKD EVs.
