Malaysia needs comprehensive EV policy to spur localisation, not just higher taxes: Industry experts

Malaysia should learn from Thailand's higher tax policy on completely built-up electric vehicles (EVs), but experts believe raising taxes alone will not spur meaningful localisation. Thailand's tax pressure has encouraged automakers to shift towards local production, while Malaysia has typically taken a more cautious approach.

Thailand recently approved plans to increase excise taxes on imported EVs to stimulate investment in its domestic automotive manufacturing sector. Imported vehicles will face higher duty rates, while domestically produced units utilizing local components will benefit from lower tax rates. The final tax figures are expected by month-end.

Malaysia needs to move away from blanket tax exemptions for imported EVs, as continued reliance on these vehicles could worsen the country's automotive trade deficit without generating sufficient domestic economic value. Analysts suggest that any policy aimed at promoting local assembly should lead to deeper domestic participation, including component manufacturing, technology, research and development, and component manufacturing.

There is concern that the automotive trade deficit is a significant obstacle to Malaysia's EV push. As fully imported vehicles flood the market, the money simply flows out, and consumer adoption alone will not build a sustainable local industry.

To ensure genuine economic value from local assembly, local content rules in CKD criteria must be strict, such as requiring local vendor integration. Industry specialists emphasize the need for stronger incentives for local automotive vendors, including for component suppliers. Malaysia should also clarify its ambition of becoming an EV hub in the region and provide clear incentives to promote local vendors.