Can The Tax Free EV Incentives Open Up Malaysia's Green Development?

The movement for EVs to be completely tax-free in Malaysia will help achieve more than just the introduction of cheaper electric vehicles. 

The recent 2022 budget announcement really did spring up a surprise for the local automotive industry. It was announced that not only are EVs from next year exempted from paying road tax, but those sold beyond 2021 will be exempt from excise duties and import duties!

That's pretty big news, even if Malaysia Automotive, Robotics and IoT Institute (MARii) CEO Datuk Madani Sahari had already indicated earlier in the year that a dedicated policy on EVs will be announced in the future. 

Madani said precisely what was mentioned by Finance Minister Tengku Zafrul Abdul Aziz during the budget announcement, but it still took everyone by surprise as no one thought it would happen or be this good to be quite frank.

While this move might seem like the government's way of gifting the people cheaper (cheaper, not cheap) electric vehicles, the actual reason behind it is actually to attract local and foreign investment and create jobs.

The way the government aims to do this relies on details as written in the MoF budget handbook, which mentioned that there will be 100% duty exemption for CKD electric cars up to the end of 2025 and 100% duty exemption for CBU cars up to the end of 2023.

The reason why CBU cars have been given a smaller window for tax exemptions is all part of the plan, as the government wants to kick start the Malaysian EV revolution with imported EVs but finish it off with local assemblies, which will indirectly create more investments and jobs. 

Environment and Water Minister Datuk Seri Tuan Ibrahim Tuan Man also thinks the incentives are a good plan as it will also help improve air quality and "support the development of green and low-carbon technologies and high-skilled green jobs in Malaysia". 

"The EV incentives are seen to be able to support the implementation of the Low Carbon Mobility Blueprint, which in turn will help improve the country's air quality index," he said in a statement on Budget 2022 as reported by the Edge.

While this noble idea is a good one and one that we hope bears fruit, there are some fears that if interest in EVs is low and investments are not made, we will once again see expensive EV vehicles in a couple of years time, but most important of all, lack of green technologies. 

But we can be hopeful and support this initiative by investing in EVs ourselves, which in turn will also help the development of our country and the development of green tech. 

Of course, these incentives at the moment are just a proposal, but we hope it gets passed in parliament as it is a good way to finally kick start our low carbon mobility sector as well as the need for highly skilled green jobs.