EVs in Malaysia not yet fully tax-free – why new 2022 prices are still higher than in duty-free Langkawi

The big news for the Malaysian auto industry this year is the tax exemption for electric vehicles (EVs), announced in Budget 2022.

As a first push for EVs in Malaysia, it was proposed that they will be completely exempt from import duty, excise duty and sales tax. The battery-powered cars will also enjoy road tax exemption, and there will be an income tax relief of up to RM2,500 for EV charging, whether you’re buying and installing one or subscribing to a plan. The duty exemption for CBU imported EVs will be in place till December 31, 2023 – a two-year window.

Now, while the Budget 2022 presentation clearly said that sales tax is also exempted, the actual text that detailed the proposal said that only import and excise duty are to be exempted. Those two duties are much bigger components in car pricing than sales tax, but there was some confusion on whether SST is included or exempted.

EVs in Malaysia not yet fully tax-free – why new 2022 prices are still higher than in duty-free Langkawi

We now know that sales tax is not part of the package, as confirmed by the Malaysian Automotive Association (MAA) in a virtual press conference last week. CBU EVs enjoy waived import and excise duties, but SST still applies, and that’s currently at a 50% rate for all imported cars (at present, all EVs are imported). This isn’t EV-specific – as you would already know, all passenger vehicles are currently enjoying 100% SST exemption for CKD locally assembled models, or 50% for imports.

For an EV to be truly tax-free, it has to be locally assembled. CKD EVs will get the full import and excise duty exemption, plus full SST waiver till the end of 2025.

So, if you’re one of those eagle eyes wondering why the new “2022 tax-free” pricing for EVs doesn’t match the true duty-free prices of Langkawi, it’s because of sales tax on the 2022 Peninsular Malaysia prices. Let’s take a look at some examples.

EVs in Malaysia not yet fully tax-free – why new 2022 prices are still higher than in duty-free Langkawi

The MINI Cooper SE facelift was launched here in June 2021, then priced from RM213,461 on-the-road without insurance (with BMW Malaysia’s base two-year warranty). Then, the Langkawi price was RM168,790. A new 2022 tax-free price came out earlier this month and the electric MINI is now yours for RM178,241. That doesn’t match the 2021 Langkawi price, and it’s down to SST, which is 5% (50% off from the standard 10% rate for cars), but hey, it’s still RM35,000 cheaper than what it was last year.

The BMW iX3 was launched here in October 2021, with a Peninsular Malaysia price of RM317,360 for the entry Inspiring trim level. Then, BMW published prices with SST as they anticipated deliveries in 2022, and that was before SST exemption was extended to June 30 this year. The 2021 Langkawi price was RM270,360.

The new 2022 tax-free price for the iX3 Inspiring is from RM307,160. We’re told that 2022 pricing for the iX3 is quoted with the full 10% SST, as the first batch has been fully sold and the second batch will arrive after June, which is when the current round of SST exemptions expire.

EVs in Malaysia not yet fully tax-free – why new 2022 prices are still higher than in duty-free Langkawi

Ditto the BMW iX, which was launched here in August 2021. Then, the xDrive40 started at RM419,630, while the Langkawi price was a mere RM313,630. We called the duty-paid mainland price for the electric SUV a bargain back then, and it’s even more of a steal now – 2022 tax-free pricing for the iX starts from RM361,430, which is RM58,200 lower. Once again, it doesn’t match 2021 Langkawi prices due to sales tax.

But those with a calculator handy would have figured out that the addition of SST alone will not account for the full difference in price. The iX’s 2022 RRP is RM47,800 higher than in duty-free Langkawi, which is a fair bit more than 10%.

There isn’t an official explanation for this discrepancy, but perhaps BMW Malaysia had initially priced the iX extremely keenly with slim margins as part of its i sub-brand market reintroduction plan, expecting to sell just a handful of units. Bear in mind that this was before the big Budget 2022 announcement. Now that the import and excise duty exemptions are in place, prospects for the iX, and other EVs, have changed drastically.

In any case, as we’ve established before, the iX was a bargain in Malaysia, and it’s even more of a steal now. Its “true price” of RM313k is over RM100k cheaper (around 25% less) than an X5 xDrive45e PHEV (which is CKD locally assembled, while the iX is CBU), whereas in most other markets, the two SUVs have near identical prices. All relative of course, and a bargain for what it is does not mean it’s cheap.

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