KUALA LUMPUR: Automotive players are arguably among the happiest lot as most of their 2022 Budget wishlist have been fulfilled, setting the base for the sector to rebound strongly.
The Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said the extension of the Sales and Services (SST) exemption particularly would stimulate the local sector.
The move will help the total industry volume (TIV) to bounce back to the pre-Covid level of 600,000 units.
The government extended the SST exemption for passenger vehicles for six months until June 30 next year, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz announced when tabling the 2022 Budget last Friday.
The exemption is for both completely-knocked down (CKD) and complete-built up (CBU) passenger vehicles.
Tengku Zafrul said 100 per cent SST exemption would be given to CKD passenger vehicles, while 50 per cent to CBU units, including for both multi-purpose vehicle (MPV) and sport utility vehicle (SUV).
The SST exemption was first extended from January 1 until June 30, 2021 under the Penjana economic recovery plan to revitalise the economy.
The government announced another extension for SST exemption from June 30 until December 31 this year to spur demand for both CKD and CBU passenger vehicles.
Tengku Zafrul also said the government saw the potential in electric vehicles (EVs), categorising the segment under the energy-efficient vehicles (EEVs) to minimise air pollution.
"To support the development of the local EV industry, the government intends to provide full exemption on import and excise duties for EVs," he said.
Tengku Zafrul said road tax exemption of up to 100 per cent would also be given to EVs.
Income tax relief of up to RM2,500 will be given to individuals who purchase, install, rent and as well for monthly EV charging facility subscription fee.
Aishah said the sector had been badly hit during the two and half months this year resulting from the lockdown.
"This has forced manufacturing facilities to shut down their operations," she told the New Straits Times (NST) when contacted.
Aishah said chip shortage had also affected the automotive market as manufacturers could not deliver their vehicles on time, causing delay in production.
"Thus, we are not able to reach to the level that we have projected at 570,000 for 2021, earlier this year," she added.
MAA is happy with the EV tax exemption as Malaysia has long been absence of this incentive, albeit the high presence of EV in the country.
"The exemption of import and excise duty for EVs would spur more sales in Malaysia and entice EV manufacturers to invest in the country for the production facility, while making Malaysia as their production hub for the Asean market," Aishah said.
Malaysia Automotive, Robotics and IoT Institute (MARii) chief executive officer Datuk Madani Sahari said the SST exemption had proven to be a great booster for the automotive sector during the pandemic.
"The continuation of the SST exemption until June 2022 would certainly give breathing room to manufacturers in fulfilling their customers' orders from backlogs due to the events in 2021," he told the NST.
Madani added that there had been a steady increase of bookings by consumers looking to take advantage of the SST exemptions towards the end of the year.
He said the shortage of electronic chips and recent shutdown of manufacturing operations due to the lockdown in June had caused backlogs for automotive manufacturers in meeting the current demands of consumers towards the end of the year.
"The SST exemption is only valid at the point where completed vehicles roll out of the factory. Therefore an extension of the SST will provide more time for original equipment manufacturers (OEMs) to procure the parts needed to complete their vehicle assemblies," he said.
Madani said the exemption would serve as a further boost for consumers to consider purchasing new, safer vehicles with better technology, through the extended exemptions announced in 2022 Budget.
On the incentives for EVs, he said this would encourage both consumer and businesses that would like to begin their journey towards electromobility.
"The exemptions on import duties, excise duties and road tax, as well as the RM2,500 tax relief for purchase of EV facilities would certainly excite consumers, as costs of ownership of electromobility reduces significantly and is accessible to many more.
"This would hopefully attract more investment and businesses related to electromobility as there would be a larger consumer base when the incentives are rolled out," he said.
Madani said the initiative was also an important step forward for Malaysia in meeting its sustainable development goals and reducing its carbon footprint.