KUALA LUMPUR: Carmakers in Malaysia could receive greater tax incentives under a revamped mechanism aimed at encouraging genuine localisation and ultimately making vehicles more affordable, says Sim Tze Tzin.
The Deputy Investment, Trade and Industry Minister said the government was reviewing its New Customised Mechanism (NCM), with localisation set to be a key consideration in determining incentives for automotive companies.
“If you do more localisation, you’ll get more tax exemptions.
“If you do talent development, R&D, that kind of thing, then they will get more tax reduction,” he told reporters at the Global Automotive and Technology Expo (GATE) 2026 here on Wednesday (Aug 26).
Sim said the incentives could include reductions in excise duties, with companies that contribute more to Malaysia’s automotive ecosystem potentially receiving greater benefits.
“The more they do, the better they get,” he said.
He said the government wanted manufacturers to localise components, particularly critical components, while investing in research and development and developing local talent.
The revamped mechanism, he said, would also be simplified to make it less complex for businesses, while maintaining its focus on localisation.
“We want true localisation. The objective is on real localisation,” he said.
Sim said the government was also looking to bring incentives for internal combustion engine (ICE) vehicles and electric vehicles (EVs) under the new mechanism.
This comes as the current tax holiday for EVs is set to expire at the end of this year.
“From next year onwards, the new customised mechanism will come in,” he said.
Sim said the approach was intended to encourage carmakers to build a deeper presence in Malaysia rather than relying heavily on imports, while helping to strengthen the country’s automotive supply chain.
He added that greater incentives arising from higher levels of localisation could ultimately translate into lower vehicle prices for Malaysian consumers.
However, details of the revised mechanism have yet to be finalised, with Sim saying the ministry would engage industry players before its implementation.
“Good policy needs some time, and we will start engaging with the industry,” he said.
