The shift from fossil-fuelled ICE vehicles to EVs is a momentous one that is disrupting the global automotive industry
by S BIRRUNTHA
INVESTMENTS into Malaysia’s electric vehicles (EVs) sector is projected to pick up in coming years as the sector is recognised as a key technology for the future of automotive power systems.
Sunway University Business School professor and economist Dr Yeah Kim Leng said given the rising EV adoption in the advanced countries and the adoption of a net zero carbon target, Malaysia’s largely foreign-driven automotive industry will inevitably be shaped by the rising global EV trends.
Hence, he noted that investment into the EV sector in Malaysia is not a question of “should” but “when”.
“The early adopters in Malaysia are focused largely on the high-end segments. However, with more players and increasing economies of scale in developing charging infrastructures and improving advantages of EVs over internal combustion engines (ICEs), it is foreseeable that investments in the middle and mass market segments will likely surge in the coming years.
“The expected acceleration will be more vigorous if the government were to support the industry shift with fiscal and financial incentives as seen in countries favouring EVs as a key strategy to reduce carbon footprint,” he told The Malaysian Reserve (TMR) recently.
Explaining further, Yeah said the shift from fossil-fuelled ICE vehicles to EVs is a momentous one that is disrupting the global automotive industry faster than anticipated by many industry players in Malaysia.
He opined that due to a multitude of reasons including an insufficient push by the government and feeble attempts by global car makers to introduce hybrids and EVs in Malaysia, it is not surprising that EV take-up remains low.
He pointed out that the EV industry is also said to trail those in Thailand and Vietnam.
“Due to huge investment in research and development, and rapid technological advancement in EVs by global car companies — especially those in China — the cost and economics of EV ownership is about equal or superior to ICE especially if carbon footprint is factored into the comparison.
“For this reason, a number of European countries have set a target for a complete switchover to EVs,” he noted.
Commenting on the challenges and conflicts of EV adoption in Malaysia, Yeah highlighted that the potential of EVs was recognised early in the country’s national automotive policy.
However, he said both the domestic and foreign players were relatively cool due to lacklustre market response.
He added that the cool market demand is understandable given the short vehicle range, lack of charging infrastructures, high cost and low resale value.
Yeah said moreover, the local industry lacks indigenous technological and innovation capabilities in both EV manufacturing of EVs and charging facilities.
“The automotive industry will also need to rebuild its supply chain activities involving parts, components and related services.
“The lack of industry coordination and sustained policy support thereby render the industry makeover a difficult one until the economics of EVs becomes overwhelming due to widespread global adoption.
“The next few years therefore will witness a reshaping of Malaysia’s EV industry in line with global trends,” he noted.
Echoing similar views, Putra Business School Associate Prof Dr Ahmed Razman Abdul Latiff told TMR that Malaysia should continue to invest in EV as the global trend already shifted towards green energy and saving the environment through less pollution.
He added that major international automakers now place a high focus on the EV, which is predicted to upend the field of road transportation.
Nevertheless, Ahmed Razman said Malaysia should also give priority to some of the challenges that come with the adoption of EV in the country.
“Some of the challenges that need to be addressed are in the form of import tariffs and duties imposed on the EV.
“Apart from that, the availability of charging facilities and infrastructure across the country and the whole ecosystem to support the local EV industry should also be given attention.
“To overcome it, perhaps the National Automotive Policy (NAP) should be reviewed to make it more agile, dynamic and keeping with the latest trend,” he suggested.
According to EV charging solutions provider EV Connection, Malaysia lags far behind with just 0.96 EVs owned per 1,000 residents.
The world’s greatest rate of EV adoption is in Norway, where 81 EVs are owned per 1,000 people.
This is followed by the Netherlands, Sweden and Iceland, each with 20.6 EVs per 1,000 people (10.7 EVs per 1,000 residents).
Meanwhile, Germany had 8.5 EVs per 1,000 residents, the UK (6.7 EVs per 1,000 residents), France (6.5 EVs per 1,000 residents), the US (5.2 EVs per 1,000 residents), China (three EVs per 1,000 residents) and South Korea were noted as among the nations with an EV adoption rate of fewer than 10 EVs per 1,000 residents (2.9 EVs per 1,000 residents).
Malaysia’s aim of encouraging EV adoption has resulted in initiatives to make them more affordable.
During the tabling of Budget 2023, former Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz announced that EVs would be exempt from import and excise duties, with the exemption period being up to Dec 31, 2023, for fully imported (CBU) EVs, and up to Dec 31, 2025, for locally-assembled EVs.
Under Budget 2023, Tengku Zafrul said the government will extend the exemption for CBU EVs for another year to Dec 31, 2024.
It also proposes 100% tax exemptions on the statutory incomes of manufacturers of EV chargers, as well as a 100% Investment Tax Allowance, from the year of assessment 2023 until 2032.
Besides that, an improvement on the Green Technology Financing Scheme was also planned by increasing the guaranteed value to RM3 billion up to 2025, expanding the scope of the guarantee to the EV sector with a guaranteed limit of up to 60%.
The decision to provide tax exemptions on the import of CBU EVs was well-received by auto industry players, according to the Malaysian Automotive Association.
However, the association noted that it had requested a longer time frame for the exemption, as the volume of EVs is still very small currently, at just 2% of the total automotive industry volume.
Previously, Bernama had reported that Melaka is set to receive an investment totalling RM1 billion from a Bumiputera company, Fieldman EV Sdn Bhd, to develop the country’s first electric car assembly plant.
Chief Minister Datuk Seri Sulaiman Md Ali said the plant will be constructed on 200ha land at the Elkay Lipat Kajang Industrial Area in Jasin.
He said the company also obtained exclusive rights to distribute EVs in Malaysia and the South-East Asian regional market for right-hand drive vehicles from China’s automotive company, Changan Automobile Corp.
“Fieldman EV intends to launch EVs and is interested in building an assembly plant in Melaka, together with local companies by utilising Changan’s technology.
“The state government welcomes this cooperation which will provide long-term benefits by further strengthening the development of the automotive industry in Melaka,” he noted.
In July this year, it was reported that Samsung SDI Energ y Malaysia Sdn Bhd will invest RM7 billion to build a state-of-the-art facility to manufacture batteries for EVs near its existing plant at the Taman Tuanku Ja’afar Industrial Park in Senawang, Negri Sembilan.
The new facility, which is expected to begin operation in 2025, will see the production of some 800 million battery cells a year.
The Malaysian automotive industry was driven by several government agencies under different ministries.
Government agencies and ministries collaborated with the Transport Ministry to lead the country’s automotive industry.
Malaysia Automotive Robotics and IoT Institute (MARii) is an agency established under the purview of the International Trade and Industry Malaysia Ministry (MITI) that acts as a coordination centre and think tank to improve Malaysia’s automotive industry and general mobility.
In collaboration with MARii, MITI released NAP 2020.
Among others, NAP 2020 highlights the development of the Next Generation Vehicle in the areas of charging, energy management and safety.
The Malaysian Green Technology and Climate Change Corp (GreenTech Malaysia), a division of the Environment and Water Ministry (KASA), is heavily involved in Malaysia’s clean and efficient transportation sectors.
It also promotes the country’s green growth and lifestyle initiatives. In partnership with GreenTech Malaysia, KASA is putting out the Low Carbon Mobility Blueprint 2021-2030, which calls for increased vehicle fuel efficiency and emissions, the adoption of EVs and other low-emission vehicles, the use of alternative fuels and mode changes to reduce greenhouse gas emissions and energy use.
The Low Carbon Mobility Blueprint 2021-2030 and NAP 2020 are both anticipated to act as catalysts in further boosting the competitiveness of the Malaysian automotive sector in the ensuing years.
- This article first appeared in The Malaysian Reserve weekly print edition