Malaysia Automotive Institute CEO Madani Sahari has revealed that the upcoming revision of the National Automotive Policy (NAP) will further promote local vehicle assembly, particularly of Energy Efficient Vehicles (EEV), in an attempt to transform the nation into a regional production hub for EEVs.

At a meeting with members of the media held at the Ministry of International Trade and Industry yesterday, Madani also explained the structure of car prices in relation to excise duties and how they can be reduced by the increase of value-added activities undertaken by a carmaker.

The revised NAP will see manufacturing licenses and pre-packaged customised incentives given for EEV production and investment. A vehicle shall be classified as an EEV if it meets or performs better than a set fuel consumption figure for its kerb weight, and unlike the current 2,000 cc cap for hybrid vehicle tax exemption (which expires at the end of this year), there will be no engine size restrictions.


According to Madani, this has already received approval, and a table of vehicle kerb weights and their corresponding fuel economy figures required for EEV status has been drawn up (unfortunately, the table was not shown during the briefing). He also said that plans exist for EEV regulations to be also carbon emissions-based, although this would have to be put on hold until our fuel reaches Euro 4 grade.

The Road Transport Department (JPJ) would test the vehicles’ fuel consumptions to the New European Driving Cycle (NEDC)’s R101 standard and UNECE WP29 (the World Forum for Harmonisation of Vehicle Regulations), Madani said, adding that private sectors would also be encouraged to set up such testing facilities in Malaysia.

The MAI CEO also explained the breakdown of the car price structure (see above pic) – carmakers first submit an Into Showroom Cost (ISC), taking distribution costs, general expenses and profit into account (A). This figure gets excise taxed (B), before other costs (C) enter the equation. A 10% sales tax is imposed on the sum of the ISC, its excise tax and the other costs (D), and the on-the-road price is the sum of A, B, C and D.


He said that nett vehicle excise duties paid currently stand at 40-50% for locally-assembled cars, and 75-105% for imported cars. This serves to encourage foreign carmakers to set up shop here (with the potential of even reducing the duty to zero if enough value-added activities – like R&D and vendor involvement – are carried out in the country), thereby creating more jobs in the industry and contributing to the nation’s economy. Thailand and Indonesia, he said, are paying 30-50% and 30-75% respectively in excise duties.

The general message is that excise duties for imported cars are not going to come down any time soon, but through our Free Trade Agreements (FTA) with ASEAN and Japan, amongst others, there is a potential at least for import duties for cars from these countries to be reduced further.

Madani said that of all the said factors influencing car prices in Malaysia, only the import (if applicable), excise and sales taxes are within government control, but liberalisation through the FTAs could increase market competition that could in turn see new car prices come down.

Formed in 2009, the MAI works with MITI to develop and grow the local automotive industry through research and study, which includes the drafting of the NAP.