Asked on the Government’s policy and support in terms of infrastructure as well as Electric Vehicle (EV)-related incentives to attract the interest of investors and the people alike, Tengku Zafrul said under NIMP 2030, EV has been identified as one of the main drivers of growth towards a green economy.
“The government has designated the production of affordable local EVs as a (with permission) mission-based project, and the project will also empower the development of the E&E industry in (with permission) integrated circuit design. Therefore, encouragement and initiatives will be more focused on the development of this industry and its supply chain, especially the critical ones,” said Minister of Investment, Trade and Industry (MITI) Datuk Seri Tengku Zafrul Abdul Aziz said during the ministry’s winding up session of the Supply Bill 2024 at the Dewan Rakyat today (Oct 31).
He added, various incentives and incentives have been introduced and implemented by the Government that not only aim to attract investment in EVs but also benefit the people. The incentives offered include direct and indirect tax exemptions.
For direct taxes, the Government offers income tax exemptions through Pioneer Status Encouragement or Investment Tax Allowance of up to 100% for a period of up to 10 years to encourage investment in the production of EVs and related critical components such as batteries, motors and others.
On indirect tax incentives, such as import duty, excise duty and sales tax, the Government has already extended the period of full exemption from duties or indirect taxes for EVs as follows:
i. The period of complete exemption of import duty, excise duty and sales tax on locally assembled EVs is extended for another two (2) years making the total period six (6) years, starting on January 1, 2022 and ending on December 31, 2027; and
ii. The period of complete exemption of import duty and excise duty on EV Completely Build Up (CBU) imports is extended until 31 December 2025.
Tengku Zafrul said in order to encourage the use of EVs in the country, the Government also offers direct incentives to EV owners which includes full exemption from road tax for EVs whether locally assembled or imported, until December 31, 2025; individual income tax exemption of up to RM2,500 for the cost of installation, rental, purchase including rental purchase of equipment or EV charging facility subscription fees for the year assessment 2022-2023. Under Budget 2024, this incentive period has been extended for another four (4) years until assessment year 2027; and under the Budget 2024, the Government has introduced a Scheme to Encourage the Use of Electric Motorcycles with a rebate of up to RM2,400. This scheme aims to help users of petrol-type motorcycles to switch to electric motorcycles.
In order to strengthen the EV industry ecosystem and boost the use of EVs, the Government also offers the following incentives such as encourage complete exemption of income tax on statutory income from assessment year 2023 to assessment year 2032 and eligible for 100% Investment Tax Allowance for income tax reduction of up to 100% for a period of five (5) years for EV Charging Equipment manufacturing activities; and encourage tax deductions for companies that rent EVs with the maximum eligible rental amount limited to no more than RM300,000 compared to RM100,000 before.
Under the 2024 Budget, this incentive period has been extended for another two (2) years until the assessment year 2027.
In addition, the incentives offered by the Government are also not limited to manufacturing or manufacturing activities, and EV CBU imports. Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) are also offered for green service activities including the provision of EV charging infrastructure until 31 December 2023. For GITA, the incentive period has been extended until 31 December 2026.
EV industry development gaps
Members of Parliament also raised concerns over the need for affordable EVs to increase usage and the lack of charging infrastructure.
Touching on the aspect related to the EV price, almost 50% of the EV price is actually contributed by the cost of the battery. Since EV battery technology is still considered new and involves development costs that high, then this cost greatly affects the price of EVs, Tengku Zafrul explained.
On the issue of affordable prices, for now local companies and potential investors are in the planning stage to produce EVs at competitive prices for the local mass market within one to two years.
In relation to charging stations, specifically for the development of EV charging infrastructure, the Ministry and Government agencies involved have taken proactive steps to complete the network of EV charging infrastructure in the country. For example:
i. The Ministry of Natural Resources, Environment and Climate Change (NRECC) through its agency Malaysia Green Technology and Climate Change Corporation (MGTC) which has made distribution plans for 10,000 EV charging units nationwide;
ii. The Ministry of Public Works (KKR) and the Ministry of Local Government Development (KPKT) have improved the existing approval application process for the development of EV charging on the side of the highway and at the Local Authority (PBT) level by shortening the time taken to process applications from EV charging operator (Charge Point Operator – CPO); and
iii. KPKT through PLANMalaysia and the Malaysian Fire and Rescue Department (JBPM) have also developed one (1) comprehensive guideline for industry reference to ensure the development of EV charging by CPO can be implemented more systematically by meeting safety aspects. Following the recent announcement of EV charging installation guidelines by the Minister of Local Government Development on 12 October 2023, it is expected that the number of EV charging will increase significantly in the near future.
MITI has taken note of the proposal to adopt the existing Incentive Based Regulation (IBR) mechanism as (with permission) an initial push in increasing the number of charging stations. Since all the costs under the National Grid assets will be included in the calculation of the basic tariff that will be applied to all electricity consumers, this proposal may be submitted to the NRECC for further scrutiny and consideration.
“The incentives offered by the Government are expected to be a catalyst towards the development of the EV industry ecosystem as a whole. With the increasing use of EVs, this step can reduce the intensity of GHG emissions and further help Malaysia achieve the status of a carbon neutral country by 2050 as outlined under the 12th Malaysia Plan,” he added.
