More incentives for EVs
18 Jan 2023
More incentives to expedite the adoption of electric vehicles (EVs) in Malaysia are anticipated under the revised Budget 2023 that will be tabled on Feb 24.
This is given the “still sluggish” EV adoption domestically, said RHB Research in its latest report.
The research house said Budget 2023 would likely provide incentives to attract original equipment manufacturers to assemble their EVs locally, which in turn could incentivise them to sell domestically.
This will also further increase the EV options and units availability, it added.
RHB Research also anticipated a longer tax-free period for EV purchases which could help more buyers take advantage of the tax break, when more EVs enter the market.
Note that Budget 2023 under the previous government only extended the import and excise duty tax exemptions for completely built-up unit EVs by one year to end-2024 from end-2023, while the completely knocked-down EV tax exemption period remained at end-2025.
The research house said direct incentives for corporations to install EV chargers could help address the impediment to adoption.
Recently, Natural Resources, Environment and Climate Change Minister Nik Nazmi Nik Ahmad said there would be more EV-related incentives in the revised Budget 2023.
On the long wait for EVs, RHB Research pointed out that BYD’s new Atto 3 has received about 1,500 orders within a month of its launch.
“However, we believe that the demand for EVs in Malaysia is still soft,” it pointed out.
Currently, all existing popular EV models here such as the BMW iX, Hyundai IONIQ5, Kia EV6, Mazda MX-30 have available stocks.
Although more affordable brands such as Lingbox are set to enter the market, RHB Research said certain impediments to EV adoption were still present.
Firstly, many consumers find existing EVs too pricey, relative to internal combustion engine vehicles.
“This is mainly due to the high battery costs of about 30% to 40% of the EV, which are expected to remain elevated in 2023,” noted the research house.
Secondly, customers are not used to the long charging period from around 30 minutes to over eight hours compared with the short time spent refuelling at the petrol stations.
Having said that, the time used to charge an EV should gradually decrease with technological advancements.
Thirdly, insufficient charging infrastructure would make EV ownership challenging, said RHB Research.
Another important point is that auto companies currently are lacking visibility on the excise duty reform implementation slated for 2023.
The reform is deemed unpopular amid the current high cost of living environment.
“As the government has just come into power and strives to tackle the cost of living crisis, we think that implementing the excise duty reform may lead to a step back in achieving its objective,” the research house said.
The policy will likely lift car prices by 8% to 20%, according to the Malaysian Automotive Association.
RHB Research said: “While we expect a slew of strong fourth quarter 2022 earnings, we remain ‘neutral’ on the auto and auto parts sector.
“We expect 2023 car sales to soften from a high 2022 base due to the lack of sales and services tax exemption and higher car prices,” it added.
Furthermore, the auto-related companies’ valuations are at or above historical means and also, lack rerating catalysts.
“Both companies have the most EV offerings among companies under our coverage, positioning them to capture the growing EV adoption in Malaysia and in the region,” it pointed out.
For Sime Darby, given its significant operations in China, the stock is also an attractive China reopening play, said RHB Research.
The key downside risks include persistent macroeconomic headwinds that may further soften orders, higher-than-expected interest rates and a resurgence in supply chain constraints.
Source: The Star