This article first appeared in The Edge Malaysia Weekly on March 15, 2021 - March 21, 2021

AHEAD of Putrajaya’s finalisation of its policy on electric vehicles (EVs), the Malay Vehicle Importers and Traders Association of Malaysia (Pekema) has proposed that its network of importers and traders be leveraged to bring these vehicles into the country.

Association president Datuk Zainuddin Abdul Rahman says Pekema has been at the forefront of building up markets for new models that were not brought in by original brand franchise holders, but whose popularity eventually led to the models being locally assembled.

“At one time, Honda used to be small in Malaysia, and it was we, the AP holders, who brought in Honda models. For example, we were the first to bring in the CR-V. Then, finally, Honda decided to assemble the CR-V here in Melaka.

“Since we have created the market, the demand for the model has grown and now Honda builds the CR-V here. The same goes for other models such as the Accord, Toyota Estima and Vellfire,” says Zainuddin.

In 2003, Honda began local assembly of its vehicle models in Melaka, with a capacity of 50,000 units a year for the domestic market. In 2013, the plant’s capacity was doubled to 100,000 units, and the Accord, City, Civic, CR-V, Jazz, HR-V and BR-V are now assembled there.

Another big Japanese car marque Toyota has two assembly plants located in Shah Alam and Bukit Raja, Klang. The combined capacity of both plants is also 100,000 cars annually. Models assembled at the plants include the Vios, Yaris and Hilux.

Pekema has been importing and selling EVs over the last two years, despite the lack of specific incentives for these vehicles. Over the period, one of its members, Vision Motorsports Sdn Bhd, sold close to 30 Tesla Inc cars — or the bulk of the estimated 50 Teslas in the country, all imported by open approved permit (AP) holders.

The lack of specific incentives for the import of EVs into the country, however, is restricting the numbers sold, contends Vision Motorsports’ managing director Raja Petra Marudin Raja Nordin, as not only are these vehicles expensive, but the tax structure makes it even more prohibitive.

“My customers are those who really love Teslas, because they don’t get anything out of it. They bought the cars at a very expensive price, and they don’t get any incentives from the government. They bought the cars based purely on their enthusiasm for the brand.

“So, how many people can I sell the cars to? It is about sincerity. If you want to do something, do it sincerely. For pioneer importers like me, why do I have to pay RM10,000 a unit? EVs should not be taxed at all,” maintains Raja Petra, who is also a vice-president of Pekema.

The National Automotive Policy 2020 (NAP2020) has been criticised for falling short of specific incentives for EVs and for sticking to a policy of customised incentives for automakers, rather than menu-based incentives as practised in countries such as Indonesia and Thailand.

In NAP2020, incentives accorded to automakers depend on the value of their investments, the number of jobs created, and even down to the nitty-gritty of how much Malaysian workers are paid, and whether training and upskilling investments will be made.

Incentives to be given will also be based on negotiations with the government through the Automotive Business Development Committee (ABDC), and could result in an automaker getting incentives that are different from those of another automaker.

Auto players have complained that the practice makes it difficult for franchise holders to persuade their principals to invest in Malaysia, as foreign automakers like to know exactly what is in store for them and expect conditions to be the same for their competitors.

The auto policy is expected to be tweaked, however, specifically for the EV segment.

Malaysia Automotive, Robotics and IoT Institute (MARii) CEO Datuk Madani Sahari told The Edge in an exclusive interview early last month that the government was going all out to attract investments in EVs.

For example, it will scrap excise and import duties on EVs altogether to make the technology more affordable to boost adoption of the vehicles among the public. Madani said Putrajaya planned to launch the specific policy on EVs in the first quarter of the year.

If the policy is formulated, and excise and import duties on EVs abolished, the prices of EVs are expected to fall at least 50%.

At present, the excise duty on completely built-up (CBU) EVs is 10% across the board, coupled with a 10% sales tax imposed on all cars.

In terms of import duties, CBU cars from most favoured nations attract a 30% levy, and 10% if imported from Asean Trade in Goods Agreement countries. In the case of EVs, however, most of the cars are imported from either China or Hong Kong, thus attracting a 30% import duty.

Nevertheless, it is still uncertain whether grey importers such as members of Pekema would be subject to the same treatment as the original equipment manufacturers (OEMs) because, in the past, they were not accorded the same incentives as OEMs.

In 2009, for instance, when Malaysia exempted imported hybrids and EVs from import and excise duties, it restricted the exemption to OEMs importing the models from their plants abroad, whereas AP holders were not eligible for the same treatment.

The policy was scrapped in 2014, as it failed to attract foreign automakers to set up assembly lines in Malaysia despite the incentives. NAP2014 was also the first NAP that introduced customised incentives.

Meanwhile, Pekema members have taken the initiative to provide rapid charging stations at their showrooms for EV owners.

Raja Petra says he spent around RM100,000 to set up a rapid charging station at Vision Motorsports in Kayu Ara, whose Combined Charging System (CCS) allows for full charging of an 80kW battery within an hour.

All these investments are done without any support from the government, as there is no specific policy on EVs. Even the import of the rapid charging machines is taxed.

At the same time, Zainuddin says the government should not charge the open AP holders RM10,000 for each EV imported — which it has been doing since 2010 — if it wants to encourage the use of EVs in the country.

In 2020 alone, the government collected RM290 million in AP fees, says Zainuddin, adding that, on average, 27,000 imported cars were sold in Malaysia each year by Pekema members.

From 2010 to 2020, open AP holders forked out an estimated RM3.1 billion in fees, says Zainuddin, with the amounts contributed to Kumpulan Wang Amanah Dana Automotif Bumiputra (KWADAB).

Apart from the contribution to KWADAB, as much as RM3 billion is collected every year from open AP holders in the form of taxes and duties.

Meanwhile, the Malaysian Electric Vehicle Owners Club (MyEVOC) says the government should be firm when it comes to promoting green technology, including EV, stressing that the EV policy should not be centred on industrial development, but rather on environmental protection.

For starters, in the Green Technology Master Plan, Malaysia aims to reduce carbon emission by 40% by 2020 and 45% by 2030, based on 2005 levels. The policy on EV should reflect efforts made in attempting to achieve this goal, says its president Datuk Shahrol Azral Ibrahim Halmi.

“Since 2009, we have already had a plan for green technology, and the plan was relatively holistic,” Shahrol says, noting that an issue yet to be adequately addressed is the need to reduce carbon and other greenhouse gas emissions, specifically from industries and transportation.

“On the other hand, we have the NAP, which is an industrial development policy. It is about chasing jobs and investments. Any impact on the environment, while we are chasing jobs and investments, is just a good side effect,” says Shahrol.

Adopting technologies that could reduce carbon and other greenhouse gas emissions becomes a sideshow, rather than the main event, he adds.

“Because of that, it is an industrial policy. In the end, the overarching importance is investment and jobs. It is not EV. So, the way you can sort of turn this around is basically to say that, over the next 10, 15, 20 years, we are going to gradually tighten the emission standards of all vehicles sold in Malaysia.

“Then, automatically, the person who wants to propose an ICE (internal combustion engine) investment will not continue with his plan because he knows Malaysian emission standards are getting tighter,” says Shahrol.

In Europe, the UK has enacted a policy to ban the sale of ICE vehicles by 2030, while France is also doing the same, but a decade later. In Asia, China is leading the new EV revolution; by 2035, only EVs, plug-in hybrid EVs, fuel cell or hybrid vehicles will be sold.

Closer to home, Singapore has also pledged to ban the sale of fossil fuel-powered vehicles by 2040. In the US, California is set to phase out the sale of new gasoline cars by 2035. It is reported that Japan will also ban the sale of ICE vehicles by mid-2035.

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