Electric vehicles get a tax-free boost

 

Finally, Malaysians will be able to afford electric vehicles (EV) and reduce their carbon footprint, via the full tax exemptions for zero-emission cars granted in the 2022 budget proposal tabled last Friday.

An automotive industry veteran said he hoped that the tax incentives will lead to EV’s being manufactured and sold for between RM140,000 and RM160,000, prices which the middle-class Malaysians can afford.

“The next more complex step is to reduce actual emissions from internal combustion engine cars which will have significant impact on cost for cars, especially the mainstream national cars, Proton and Perodua, and Asean-specific products from the other manufacturers,” he said.

With clear and longer-term policies over 10 years, Malaysia should receive a tide of proposals from battery-powered electric vehicle makers from China, South Korea, Europe and Japan.

Even more compelling is that the tax incentives will boost at least one Canadian-incorporated, Malaysian-owned company’s decision to manufacture its small volume EV sports car on its home grounds in Penang and the Kulim High-Tech park.

Duesenberg Technology Inc is in final discussions with Malaysian agencies and is already on the cusp of importing components for producing 1,000 units a year of a two-door coupe to be priced in the RM300,000 bracket.

Production for the car, codenamed Duesenberg Technology Electric (DTE) is scheduled for later next year, says a vendor who declined to be named.

I would venture to add that when EV’s are priced at RM200,000-RM250,000, there will be multinational corporations who will buy them as company cars or delivery vans in order to comply with the environment, sustainable and governance (ESG) requirements.

The 2022 budget finally positions Malaysia to be in a favourable position vis-à-vis attracting investments from EV carmakers from South Korea, Europe and Japan.

The EV incentives are two-tiered. Those for CBU’s or Completely Built-Up BEVs will be effective for two years from 1 Jan 2022 to 31 Dec 2023, while EV’s that are locally assembled will enjoy the tax incentives for four years until 31 Dec 2025..

However, there is more to the EV incentives than what was published in the 2022 budget proposal, says another industry participant specialising in CKD operations.

“The government is already deep in discussions with the automotive industry to further promote the EV sector depending on business growth, the decarbonisation of the environment, technology gains to the nation and other parameters.

“One fundamental issue about the CKD programme is the definition of local content. EV’s have traction battery packs and electric motors and maybe a quarter of the components of internal combustion engines. EV’s have far more software and computers.

“It’s clear that the local content of the current CKD programme for ICE cars can’t be transposed directly to battery electric vehicles. There will be lots of new areas to be negotiated,” this source said.

The global push into EVs is led by the European Union which has directed its executive arm, the European Commission to set strict decarbonisation goals.

COP 26 which started on Sunday in Glasgow, will discuss several issues relating to zero-emission targets including vehicles and the role of rich nations in funding less well-off nations to cope with climate change and the destruction caused by more weather extremes.

The Electric Vehicle is a hugely disruptive force in the automotive industry as was reflected this month when Tesla’s market valuation notched USD1 trillion, more than the values of the next 9 biggest carmakers in the world combined. Tesla launched its first car, the limited edition Roadster EV, in 2009.

The disruption can also be seen in Asean, where Vietnam’s Vingroup, a Johnny-come-lately in the regional automotive industry, is going to be the first to make and sell its own EVs. Two EVs from its subsidiary, VinFast, will be displayed at the LA Auto Show in California next month for sale in the US and Europe.

Indonesia is also cornering the market for nickel and copper and using these metals to attract car companies and technology owners to make EV batteries on the more fortunate of its 17,000 islands.

In Malaysia, the Duesenberg Technology group is led by Joe Lim Hun Beng whose claim to fame is that he built the Zhuhai International Circuit, China’s first motorsport track and initiated China’s first international motor race in 1994 when China was just emerging from its self-imposed isolation of the Cultural Revolution.

Better known as the godfather of motorsports in China, his team from Zhuhai and Hong Kong led the way to the first Chinese Grand Prix in Shanghai, 2004.

Lim cemented his entry into the car industry when he acquired the heritage US car brand Duesenberg, its intellectual properties and the factory tooling in the mid 2000s. He observed Tesla’s success in electrification and noted that the EV had all the properties for a modern interpretation of a classic Duesenberg – immense torque from standstill, silent operation, and what is relevant for today’s era, zero emissions.

According to sources involved in what will probably be Malaysia’s first EV, the high voltage battery for the vehicle is at final stages of design by a technology partner. Battery cell chemistry is based on BASF technology of nickel cobalt manganese oxide (NCM) for optimum power and range and a liquid cooled system provides the range and power to an E-Axle.

The battery pack is designed so that it can be removed easily for replacement or swapping when needed using automatic connectors and racing type installation method.

It will be fully assembled in Malaysia for DTE after localisation of battery casing, liquid cooling system, and BMS programming. The electric motor/electric drive unit will be supplied by a German partner with a power range from 125KW to 250 KW

The car will have its own proprietary traction control software which will be coded and written by Dusenberg Technology’s engineers and which can be adopted to all other EV platforms by simply adding algorithms to the main structure of the software.

While the budget’s thrust for EV’s is a pleasant surprise, it is timely that this initiative is supported by a long-term plan such as a zero-carbon National Automotive Policy with a 10-year road map to galvanise carmakers into setting up regional manufacturing facilities in Malaysia.

The government’s thrust on investment and decarbonisation in the automotive sector should be as inclusive as possible and incorporate upcoming hydrogen fuel cells vehicles for commercial fleets.

With autonomous driving the next big disruptor, a new NAP should also incorporate incentives for software development. Otherwise, some German carmakers will just take advantage of the tax incentives to just sell cars without contributing to national capacity development.

The 2022 budget should also prompt the transport ministry to support the automotive sector in Malaysia by publishing monthly statistics on sales and registrations of vehicles. At the very least, the Road Transport Department should provide independent data on monthly vehicle sales, including how many BEVs are sold and what are the most popular BEVs as a guide for investors and car buyers. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.