KUALA LUMPUR: The Malaysian Automotive Association (MAA) has urged the government to extend the sales and services tax (SST) exemption on passenger vehicles in the upcoming Budget 2022.
“The automotive total industry volume (TIV) has still not achieved pre-Covid 19 levels. Also on MAA’s wish list is for the government to announce incentives for electric vehicles (EVs),” MAA president Datuk Aishah Ahmad told StarBiz.
The SST exemption, which is until Dec 31, 2021, is 100% for locally assembled or completely knocked down (CKD) passenger vehicles, and 50% for imported or completely built up (CBU) passenger cars.
Meanwhile, Maybank Investment Bank (IB) Research did not rule out the possibility of an SST exemption extension beyond end-2021.
“An SST extension will be positive to 2022’s TIV. The 2021 SST exemption did not realise its full potential due to the multiple lockdowns in 2021,” said the research unit.
However, Maybank IB Research expected such policy to be possibly announced towards year-end, as announcing it during the budget would soften sales in November and December.
The research unit forecast 2022’s TIV to be 580,000 to 600,000 units while TIV for 2021 to be 500,000 to 520,000 units.
Maybank IB Research has “buy” calls on Bermaz Auto Bhd (target price: RM2.25), Sime Darby Bhd (target price: RM2.70), MBM Resources Bhd (target price: RM4), UMW Holdings Bhd (target price: RM4), and Tan Chong Motor Holdings Bhd (target price: RM1.45).
According to Maybank IB Research, if Malaysia’s upcoming EV policy is attractive, Bermaz Auto would plan to bring in battery EV, hybrid and plug-in hybrid cars from Kia, Peugeot and Mazda.
“Bermaz Auto has identified private charging operators (PCOs) to collaborate with, on the EV charging infrastructure (to address range-anxiety issues). Its EV models will have subscription-based plans (for batteries; key cost component of EVs – to address cost/ warranty issues),” said the research unit.
Maybank IB Research also noted that UMW will invest RM270mil to expand its current manufacturing operations and facilities including the CKD and introduction of a new and technologically-advanced generation of hybrid electric vehicles.
It hoped policymakers would green light an EV policy, as a forward looking, well-thought framework, with attractive incentives (taxes, infrastructure and tariffs) would spark interest and super-charge the electromobility adoption, transition and penetration in the Malaysian automotive market.
“This move, if executed well, will transform the land transportation landscape, to meet the nation’s low-carbon economy aspiration and match up to the progress of its South-East Asia counterparts.”
Maybank IB Research also hoped for the upcoming budget would have a section dedicated to green automotive targets.
“Attractive tax incentives should be accorded to early adopters (of green vehicles). This would also attract automotive players to bring in EV models into the market,” said the research unit, adding that zero-emission battery EVs (BEVs) should be accorded full tax exemption status.
Also, BEVs require infrastructure support (such as EV chargers) and capital expenditure (capex) to complement them.
Maybank IB Research also noted that establishing a solid and reliable public EV charging network (akin to petrol stations) would ensure a seamless transition and alleviate driving range anxiety concerns (especially on long-distance commutes).
“The EV charging market has huge growth potential but the start-up phase is capex-intensive (especially for Direct Current Fast Chargers or DCFC), a scalegame, hard to monetise and is not a profitable business at the early stage.”
To jump start the infrastructure rollout, the government needs to play a supporting role by offering attractive incentives, matching grants and tax rebates to these PCOs that come with upfront capex and services first and consumers (home charging, EV early adopters).
The research unit opined that the government should also consider granting special utility tariffs (a form of subsidy akin to fuel) for EV users during the early adoption stage.
“The tariff rates for domestic consumers are currently at 21.8 to 57.1 sen per kWh. Policymakers should also make it essential for new commercial/offices and existing/new residential buildings to impose a set ratio of charging stations per resident, improve access to overnight charging by implementing a ‘right to charge’ rule for existing multi-user dwellings such as high rise buildings (condominiums/flats),” said Maybank IB Research.