Subsidising the EV transition

THE government’s proposal to impose a levy on electric vehicles (EVs) to fund the expansion of Malaysia’s public charging network has sparked debate.

After granting import duty, excise duty and sales tax exemptions for completely built-up EVs over the past four years, the government estimates that it has forgone RM3.3bil in tax revenue, while investment in public charging infrastructure has not kept pace with expectations.

To date, the rollout of charging stations has relied largely on private investors. However, progress has been slower than anticipated due to bureaucratic delays, lengthy approval processes and high capital costs.

According to a United Nations Trade and Development report, it can take up to nine months to complete a charging station, while installing 10 rapid chargers may cost between RM1.5mil and RM2mil.

Combined with the relatively low adoption of EVs, these costs result in long payback periods that discourage private investment.

This creates a “chicken-and-egg” problem: consumers are reluctant to purchase EVs without sufficient charging infrastructure, while investors hesitate to expand charging networks until EV ownership increases.

A dedicated EV levy could help address this challenge by creating a ring-fenced fund to support charging projects in less commercially attractive but socially important locations, such as apartment buildings, rural areas and highway corridors.

The fund could provide gap financing or matching grants, reducing investment risks without requiring the government to fully finance each project.

However, the proposal also presents trade-offs. Since many of the current obstacles involve regulatory approvals, grid readiness, land access and project implementation rather than funding alone, a levy may not resolve the underlying issues.

Although the government has yet to decide how such a levy would be implemented, any additional cost imposed on manufacturers or distributors is likely to be passed on to consumers.

Higher EV prices could slow adoption, ultimately reducing demand for charging infrastructure and undermining the policy’s intended objective.