New policy could make Malaysia the next big EV market

According to Malaysian newspaper The Star Online, prices of hybrid cars may go up if the Government decide not to extend the exemption of import and excise duties on hybrid cars, that expires at the end of the year.

In the same week UK business newspaper the FT is reporting “Carmakers flock to new southeast Asian growth frontier“, in which case; they should be looking at manufacturing or part-completing their vehicles locally: An industry insider believes that the current exemption will be extended for vehicles which are partly manufactured/finished in Malaysia, but not for pure imports, and both Honda and Toyota are preparing for a drop in sales of their imported hybrid models.

Import duties have been high in Malaysia for many years as part of a strategy to support local automotive manufacturers such as Perodua, and Proton. Foreign vehicles are seen as highly desirable, status-products due to the high cost compared to domestic vehicles – the exemption has so far been effective in boosting sales of hybrids in the country, because it has made a number of popular Japanese vehicles affordable to consumers, which also happen to be fuel efficient and environmental.

At COP15 in 2009, the Prime Minster of Malaysia, Najib Razak, proposed that Malaysia would reduce its CO2 emission’s to 40 per cent by the year 2020 compared with its 2005 levels, subject to assistance from developed countries. The import duty exemption for Hybrids and EVs was the main mechanism introduced for the transport sector to help Malaysia realise that commitment, although they are also investing in domestic EV and hybrid manufacturing capability, and EV infrastructure investment.

As the exemption comes to an end it is widely expected that Malaysia will once again revise its National Automotive Policy (NAP), which could see Southeast Asia’s third largest economy turned into a hub for EEV production, by attracting foreign original equipment manufacturers (OEM) that are looking to enter the bigger Asean market.

It is possible that the exemption will just be extended for now, but cash subsidies to support EVs have been mentioned before as part of a future NAP, as well as tax incentives and a number of local incentives such as priority parking – all designed to encourage consumer uptake.

The Star Online story…

“Sales of hybrid vehicles might be dented should the Government decide not to extend the exemption of import and excise duties on hybrid cars that would be expiring at the end of the year. The move will drive up prices of these models.

Industry players are expecting the Government to continue with the exemption for locally assembled completely knocked-down (CKD) hybrid vehicles but not for imported completely built-up (CBU) hybrid cars.

An industry player who declined to be named said the main hybrid car distributors, UMW Toyota Motor Sdn Bhd and Honda Malaysia Sdn Bhd, are preparing for the impact of the exemption withdrawal.

“There might be a possibility of withdrawing the exemption for CBU cars as this would be in line with the Government’s aspiration to promote the country as a manufacturing hub for energy efficient vehicles (EEVs),” he said.

This would be in Honda Malaysia’s favour, as it is the only one with hybrid vehicle CKD assembly operations in the country. The Honda Jazz Hybrid is assembled in Malacca.

Recently, Honda Malaysia managing director and chief executive officer Yoichiro Ueno urged the Government to consider extending the incentive for CKD hybrid units.

UMW Toyota also hopes the tax incentives would be extended.

“Without the tax incentives, hybrid cars would not be as attractively priced. More time is also needed to educate the public and improve awareness on these eco-friendly cars. We are also seriously looking at introducing new Toyota hybrids in Malaysia, or local assembly operations with the right incentives,” said UMW Toyota Motor president Datuk Ismet Suki recently.

Hybrid cars have enjoyed tremendous sales growth in the past few years, after the Government introduced full import duty and excise duty exemptions for hybrid and electric cars and motorcycles two years ago under Budget 2011. The incentive applies to both CKD as well as CBU units.

According to Malaysian Automotive Association (MAA) numbers, sales of hybrid vehicles were negligible before the exemption with just 322 units recorded in 2010. This changed dramatically in 2011, with sales surging to 8,403 units.

It doubled to 15,355 units last year as more hybrid models were launched in the market. The hybrid car sales came from four marques, namely Honda (8,712 units), Toyota (5,653 units), Lexus (979 units) and Porsche (11 units).

“As of July 2013, the country recorded 8,571 units of hybrid vehicle sales. EEVs would still be in demand if the models were priced competitively,” said MAA president Datuk Aishah Ahmad.

At a roundtable discussion held recently in conjunction with the KL International Motor Show 2013, she expressed hope that the incentive would be extended.

“At the same time when we talk about EEVs like electric vehicles, the infrastructure must be in place before sales. The Government should let industry players know the timeframe to introduce better quality fuel. We could then relay the message to our principals, and draft up plans to introduce more fuel efficient vehicles into the country,” she said.”

See the original story here: Prices of hybrid cars may go up – Business News | The Star Online

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