With the father of the national car, Dr Mahathir Mohamad, reaching his 98th birthday, and Proton its 40th anniversary, it is time for Prime Minister Anwar Ibrahim to steer Malaysia’s auto industry back into the fast lane.
He does not carry the baggage of the protectionism that diminished the attractiveness of Malaysia as a destination for foreign investment in the automotive industry.
So far, he has issued a few key signals that he intends to be a leader for Malaysia’s energy transition and decarbonisation for cars.
Tesla will open its flagship store in Kuala Lumpur next week and it is understood that its recruitment drive pulled in thousands of applicants more than it needed.
Anwar held discussions with Tesla owner Elon Musk on Friday, but no details of their discussions have emerged.
One of the items might have been about investment in Tesla’s supercharger network that has underlied its success in Electric Vehicles (EVs).
A supercharger network is in the process of being rolled out by Pekema, the Bumiputera car importers association, in partnership with the Malaysia Automotive Robotics Internet of Things Institute (MARii), a for-profit agency under the ministry of international trade and investment.
Glamourisation of Proton
With just a few exceptions, many journalists in the 1980s were caught up in the glamourisation of Mahathir’s national car project, Proton.
We all bought the argument that the automotive industry was a key industry to modernise and enrich the Malaysian economy.
What most of us didn’t question was the method: should it be protectionism to nurture an infant versus an open market for foreign investors to compete.
Those few in the mainstream media who didn’t toe the line were eventually sidelined.
In academia, a former professor with the University of Malaya’s Faculty of Economics and Administration, as it was then named, steadfastly questioned the project’s commercial viability, principally inadequacy of economies of scale.
He eventually moved on to other, non-government educational institutes.
Malaysia’s loss, Thailand’s gain
Of the national projects that Mahathir launched, Proton outshone them all. Today, as a joint venture with China’s Zhejiang-Geely group, Proton is a booming success.
Some things could never be predicted unless by a wizard with a crystal ball.
The US has been overtaken by China as the world’s largest car market. Geely is China’s largest independent (as in, non-state-owned enterprise) car maker with a competitive scale of economies, technology ownership and an iconoclastic range of models that has shattered the moulds of legendary motoring marques from Europe.
It is a cruel if simplistic comment that the protectionism of the Malaysian automotive market has accelerated Thailand’s growth as a regional automotive hub.
Anwar must lead the way
All other things being equal, what will Anwar’s imprint be on the Malaysian auto industry?
At this moment of global disruption amid global warming, Malaysia needs strong and positive leadership for the energy transition from internal combustion engines to electric motors.
It shouldn’t be a rush into EVs because there’s the period required to wean Malaysians off the popular fuel subsidy.
One of Anwar’s signals is his recent acknowledgement that the road tax rate must be changed to favour EVs.
Currently, the Road Transport Department’s (JPJ) structure on high-powered EVs will attract higher road taxes than their petrol equivalents but this is on hold until the road tax holiday for EVs expires in 2025.
New deal in road tax
Whatever it does about road taxes, a responsible government will need to reconcile three elements:
At RM3 billion a year, road taxes are one of the biggest contributors to the national coffers.
Road taxes should be re-set to penalise carbon footprint rather than the cubic capacity of internal combustion engines.
Taxes must be intelligent so that they minimize “bad” or unsocial behaviour (driving 5-litre supercharged V8s or a 1,000km-range EV with a whopping big 700kg battery) and encourage “good” or desirable social behaviour (driving a modest EV with a 400km range).
However, what is “bad” and “good” will change as battery and energy technology with hydrogen as a carrier evolves.
Shahrol Halmi, one of the first EV owners in Malaysia and president of the Malaysian electric vehicle owners club, says that JPJ’s review and guide to the calculation of road tax presents an excellent opportunity to go back to “first principles” in designing an equitable and effective structure.
The EV owners club, MyEVOC, proposes that the new road tax structure be simplified and be applied to all vehicles, regardless of what fuels them.
“One way is to have a standard, flat registration fee for all vehicles to start with. This will ensure that there is a minimum amount that’s available to cater for the department’s administrative costs, including enforcement.
“On top of that is a kW-based fee, which is scaled linearly up to a reasonable level, with a steeper increase after that.
“Zero-tailpipe emission vehicles such as EVs and FCEVs can be given something like a 50% discount from the fees above,” Shahrol said to FMT.
In Britain, road tax is known as vehicle excise duty and is structured differently for private and commercial vehicles as follows:
Road tax for most private vehicles is typically based on carbon dioxide (CO2) emissions with different tax bands based on emission levels. Vehicles in the lowest bands (zero or low emissions) are often exempted or pay reduced rates.
Additional factors like fuel type, vehicle age, and list price when new may also impact the tax.
This road tax is typically based on the vehicle’s weight or type, rather than CO2 emissions.
What Anwar can do
Anwar is a visionary and should take the lead in electrifying the nation.
New buildings and residential units equipped with 11kW plug points should become the new fuel stations of the future, with the right-to-charge as a legal requirement for property developers.
Tenaga Nasional Bhd (TNB) has to be re-invented so that it is obliged to receive renewable energy offered by suppliers rather than setting an annual quota and restricting the supply of renewable energy to the national grid.
Alternatively, TNB should establish a new subsidiary, much like what Petronas did in establishing Gentari as an EV charge point operator.
Malaysia must arrive to harness its renewable energy resources from biomass and ocean thermal energy conversion to green hydrogen.
Boom in OEM
Coming back to the Malaysian automotive market, there’s already a liberalisation of the automotive industry as reflected by the presence of 40 original equipment manufacturers (OEM) as compared to about 20 five years ago.
About 100 new car models have been launched in Malaysia since March 2022 when Covid-19 restrictions were lifted.
Another reflection of Malaysia’s automotive industry’s turn of fortunes is the return of an entrepreneur to invest in Malaysia.
Early this month, the Malaysian owner of AAPICO Hitech Company Ltd, one of Thailand’s largest automotive component makers, signed a deal to invest RM140 million for a 60% stake in Proton’s AVEE Global Sdn Bhd.
The company’s production of dies, jigs, hot stamping parts, body assembled parts and chassis components will be both for export and domestic car plants.
AAPCO was founded by Yeap Swee Chuan, who left Malaysia more than 35 years ago when he was just a small businessman trying in vain to supply brake pads to the then government-managed Proton.
So we have two top businessmen, one from Southeast Asia and the other a global car business leader, interested in Malaysia.
Let’s hope that the 10th PM of Malaysia achieves what Mahathir set out to do: make Malaysia a regional automotive hub in this new world of electrification and decarbonisation.
The views expressed are those of the writer and do not necessarily reflect those of FMT.