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Malaysia’s auto industry needs to take a leaf from China’s new auto policy

POSTED BY Raja Danielle ON 19 April 2018

China on April 18, relaxed its automotive trade restrictions that required foreign car makers to have local partners.

Electric vehicle (EV) makers, especially Tesla, will be the first to benefit from the new policy directive.

China’s top planning agency, the National Development and Reform Commission, said the rule requiring a foreign car maker to have a local partner would be lifted this year.

The restrictions will be removed on truck and commercial vehicle makers in 2020 and all car makers in 2022.

China’s policy review would interest Malaysia’s planning agencies such as the Malaysia Automotive Institute (MAI), an agency under the Ministry of International Trade and Industry.

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Tasked with developing the automotive industry, the agency is currently drafting the National Automotive Policy (NAP) 2018 to replace the current NAP 2014.

At a time where global car giants are rushing to ramp out a range of EVs, NAP 2014 has seen Malaysia get caught out by its trade and non-trade restrictions on foreign car makers.

In addition, Malaysia’s population of 32 million does not offer the scales to attract foreign car makers.

Thailand is already ahead in the race to attract foreign investments for plug-in hybrid electric vehicles, which is seen as the first step of the ladder in rolling out fully electric vehicles.

Toyota’s and Mercedes-Benz’ plans to build battery packs for their PHEVs in Thailand is an indication of the country’s future growth.

While analysts say that China is removing its restrictions on the automotive industry to placate US President Donald Trump and his continuous rhetoric on a trade war, it is also true to say that China’s automotive industry does not need protection anymore.

China is already the world’s biggest EV market and opening the door to Tesla, Ford, GM and Toyota will make China’s automotive industry even more competitive. The popularity of the BYD e6 EV taxi in Shenzhen is a good example of how this market has grown.

Read more about the BYD e6 EV taxi here

Malaysia needs to leapfrog the technology ladder and draft policies that make EVs attractive.

Automotive makers are unlikely to manufacture or locally assemble EVs in Malaysia if there is no domestic market, a market that will only be present if the Government makes the right moves to support the EV movement.

Norway and China wrote laws and provided tax breaks to encourage EV ownership over cars with internal combustion engines, a move that was highly successful. This presents Malaysia with great frameworks to study.

The first step for Malaysia is to allow tax-free imports of EVs up to, say 10% of Total Industry Volume (TIV) of Malaysia’s 680,000 annual sales of vehicles for a period of five years.

A vibrant domestic market will attract EV makers, especially if there is the justification of a larger Southeast Asian automotive market, but that’s another story.