The slow pace of EEV-related investments

By RAHIMI YUNUS

The absence of non-standardised incentives, interpretation differences and broad policies over energy-efficient vehicles (EEVs) could stutter investments into one of the fastest growing segments in the auto industry.

The EEV programme forms a key component in the country’s National Automotive Policy (NAP) 2014, a framework which dictates the growth of the sector.

But industry players argue that there have been different interpretations and specifications from various government agencies on what is considered an EEV.

“The current EEV has customised incentives that have made it difficult for original equipment manufacturers (OEMs) to decide on investment due to the uncertain incentives that we will receive,” an industry source told The Malaysian Reserve.

Carmakers want greater clarity on EEVs under the new automotive policy, expected to be unveiled in the first quarter (1Q) of this year.

The source, who requested anonymity, said investment decisions could be impeded by different interpretations and understanding on an EEV’s definition by government agencies.      

The source said the incentives given depend on the strength of the proposal and how OEMs “present” the case to the related agencies.

In 2014, the automotive blueprint outlined technical specifications on fuel consumption for passenger and commercial vehicles and two-wheelers based on international benchmarks, but remained subjective on the incentives.

That year saw Perusahaan Otomotif Kedua Sdn Bhd (Perodua) launching Malaysia’s first EEV — the Axia.

EEVs include fuel-efficient internal combustion engine vehicles, hybrid, electric vehicles (EVs) and alternative fuelled vehicles such as compressed natural gas, liquefied petroleum gas, biodiesel, ethanol, hydrogen and fuel cell.

Based on recommendations by the Ministry of International Trade and Industry (MITI) to the Ministry of Finance, green vehicles should be locally-assembled and are eligible for customised incentives including duty rebates between 5% and over 30% for non-national cars.

Other incentives include pioneer status and grants for research and development, and training.

The source said the customised incentives approach could negatively impact vendors’ investment decisions on tools and die as their cost per unit depends on production volume.

“OEMs can determine the pricing position and expected sales volume easily, and thus facilitate the vendors to provide competitive pricing to OEMs,” the source added.

The NAP 2019 will be introduced in the 1Q, but the next strategy for EEVs remain sketchy.

There are indications that the government may impose greater access restrictions on foreign cars into Malaysia that may change their investment dynamic of EEVs in the country.

Putrajaya is also pursuing a new national car project which involves EVs and that would be factored in the next EEV programme.

An analyst said the application for EEV incentives could be improved in the new automotive blueprint.

“Hopefully, OEMs would not have to individually apply for the incentives for each model,” the analyst, who declined to be named, told TMR.

Despite having loopholes, EEV penetration has risen to 52% of vehicles sold in the country in 2017 — where 83.2% were petrol powered, 13% were on diesel and 3.8% were hybrids.

Malaysia aims to become an EEV regional hub and targets to achieve 85% of EEV production by 2020.