Tax exemptions cannot kickstart an electric vehicle revolution

Most Malaysians assume wrongly that high taxes imposed on foreign cars are the prime reason for electric vechicles (EVs) being extremely expensive, and thus preventing an EV revolution in Malaysia.

Contrary to popular belief, tax exemptions would only boost sales of hybrid electric vehicles and plug-in hybrid electric vehicles, but have a minimal impact on battery electric vehicles.

Free-trade agreements exempt import duties and excise duties for cars made in Japan and ASEAN, but those cars incur a 10% sales tax.

Hence, a 2019 Complete Built-Up (Japan) Nissan Leaf was priced at RM188,888 making Malaysia one of the top-45 cheapest countries to buy a Nissan Leaf.

The tax-free Nissan Leaf is priced at RM181,264 (without sales and service taxes for the Recovery MCO season). Thus it is priced closer to the premium Toyota Camry than its cousin the Perodua Myvi.

The BMW i3S and the cheapest Tesla Model 3 Standard Range may cost about RM200,000 and RM140,000 without taxes.

Tax-free imported EVs will remain at double the affordable price range of RM70,000. The price of EVs would need to fall within this range to kickstart the EV revolution.

Malaysia is not an outlier as the EV revolution is concentrated in high-income nations such as Europe, Australia, New Zealand, Canada, and California (US).

In the People’s Republic of China, six cities that are home to the wealthiest individuals in China – Beijing, Shanghai, Shenzhen, Guangzhou, Hangzhou and Tianjin – make up the largest share of imported EV sales.

Most EVs are manufactured in Europe, California and Japan which has some highest electricity and wage rates in the world.

Malaysian purchasing power can never pay for imported EVs made by the highly-paid workers of Europe, America or Japan. Hence, EVs need to be manufactured within Malaysia for the prices to match Malaysian purchasing power.

The shift towards EVs in Europe, PR China and California (US) was pushed by tighter emission standards onto automobile manufacturers, rather than by tax exemptions. European Union and Chinese EV revolutions were kickstarted by introducing emission standards and, by a future ban on petrol/diesel vehicles, forcing car manufactures to roll out EVs. Even Tesla owes its success to Californian, Chinese and European emission standards and a future sales ban on petrol/diesel vehicles.

An EV revolution in Malaysia can only be kickstarted if Malaysia tightens its emission standards and announces a total ban on sales of petrol/diesel vehicles.

This will force automotive corporations will to introduce and assemble EVs for the Malaysian market, kickstarting an EV revolution. Malaysia’s domestic electrical and electronics industry is more than capable of producing EV components.

Sarawak has one of the cheapest unsubsidized electricity rates due to a renewable energy penetration rate of 75%. Hence, Sarawak has the potential to become the ASEAN hub for moulding of aluminium and lithium for EVs production.

Malaysia should thus impose periodic emission standards revisions followed by a total sales ban in 2025 and 2035 for small petrol motorcycles and petrol cars respectively.

Written By;

Central Committee,
(Bureau for Environment & Climate Crisis)
Parti Sosialis Malaysia (PSM)
State Chairperson,
Parti Sosialis Malaysia Negeri Melaka (PSM Melaka)

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