What Do EV Manufacturers Owe Malaysians For Selling Tax-Free Here?

Selling cars tax-free anywhere is a privilege, not a right. It has to be earned.

Every car company has been given the green light to sell electric vehicles virtually tax-free in Malaysia. Whether you’re one of the longest operator of a CKD plant in the country like Volvo Car or a brand that didn’t even exist here before 2023 like Tesla, the policy is the same. This is actually extremely generous on the part of the government and is part of the reason why we’re seeing a huge uptake of electric vehicles in Malaysia despite the inconveniences involved. It’s not that these cars are cheap – it’s that they’re not being taxed temporarily.

To some buyers, the opportunity to NOT give the government any money on a car purchase is enough of a motivation. Others are motivated by the technology involved in this new generation of cars. Others still like the opportunity to switch to zero tailpipe emissions for the environment (works just as well for the ego too).

To many established car brands, particularly Japanese brands, the policy is a little unfair. It came almost out of nowhere before they had the products ready to sell. They were more invested in hybrid technology and hydrogen fuel cell technology – which both were more practical and possibly more “green” ways forward for personal mobility. Yet the government is only making things easy for battery electric vehicles with the current policy.

To me, someone who most certainly won’t be buying a tax-free EV, I feel there is a wider obligation on the brands who sell these cars here. They cannot treat Malaysia as a dumping ground, nor should they get into this very different type of mobility business without a long-term plan for these products once they leave the showrooms. It’s an obligation that they’ll obviously ignore in unison, but here’s what I think they need to do nonetheless:

1. Develop a localized “South East Asia” Harmonized Electric Vehicles Test Procedure based on climate and driving conditions in this part of the world. EVERY electric test cars I’ve taken for a drive under-delivers on advertised battery range as soon as the air conditioner is switched on. And in this part of the world, the air conditioner will definitely be switched on. The drop in range is not severe enough that you’ll feel short changed, but it’s noticeable. It’s like buying a phone with 256GB of storage only to effectively have about 200GB of usable space. Having a South East Asian driving cycle that addresses local conditions will give buyers a more accurate idea of what they’re buying.
2. Work towards a unified public EV charging platform. The public EV charging infrastructure is a mess. It’s behind what our neighbours have, it’s behind our government’s own goals and it’s not easy to use unless you’re relatively tech savvy. You need a handful of different apps in order to find, navigate and access all the public chargers in Malaysia. Each one requires you to create an account and input payment information and there’s no one unified app, not even PlugShare, that lets you pay all of them. It’s a feudal system with each charging provider collecting rent and refusing wider cooperation until the carmakers incentivize them or the government forces them to work together.
3. Make their local assembly “greener”. Most CKD operations are done with a local partner. This ties the hands of the principal somewhat, but it also frees them of the obligations required to the environment. They may be using carbon-free energy in Europe to make cars, but the assembly plant in Malaysia could be running on coal energy. Why? Because it’s not technically their factory to convert. Some brands are making the right moves in this area, but others are looking at it as a non-issue. This has to change.
4. Deal with the batteries. Right now, when battery cells die and are replaced under warranty, there are programmes in place to make sure the cells go back for recycling or repurposing. This should be done locally and brands should be transparent about the process. Right now we only have their word to take about what happens to these battery cells. We also don’t know what happens to older, out-of-warranty batteries. Right now the oldest PHEV and EV batteries are beginning to exit warranty coverage. These cars are plummeting in resale value and owners may not want to return to the principal to pay full price should they need battery repairs. What happens to these cars? Is it down to private owners and private third party businesses to make sure the Earth isn’t poisoned? Or should carmakers selling tax-free EVs put some resources into making sure these batteries are always accounted for?