Impact: POSITIVE

Measures

• Full exemption of import duty on component, excise duty, and sales tax for electric vehicles (EV) for CKD (completelyknocked down) extended until 31stDecember 2027 (previously to end in December 2025).
• Full exemption of import and excise duty for electric vehicles (EV) for CBU (completely-built-up) extended until 31stDecember 2025 (previously to end in December 2024).
• For manufacturer of EV charging equipment,100% income tax exemption (FY2023 until FY2032) and 100% investment taxallowance (up to 5 years, with applications received by the Malaysian Investment Development Authority (MIDA) from 25February 2023 until 31 December 2025).
• 500 units of EV charging infrastructure for the whole Malaysia by GENTARI, subsidiary of Petronas.
• EV charging infrastructure by Tenaga Nasional Berhad (TNB) at 70 major locations (RM90m).
• Tax incentive for company renting non-commercial electric vehicle (FY2023 until FY2025).
  • Maximum rental amount allowed for tax deduction up to RM100k (for vehicle valued below RM150k)
  • Maximum rental amount allowed for tax deduction up to RM50k (for vehicle valued above RM150k)
• Extension of tax incentive for aerospace industry (up to December 2025).
  • Income tax exemption of 70% to 100% for a period between 5 to 10 years.
  • For new venture, investment tax allowance of 60% to 100% for a period of 5 years and can be set-off against 70%to 100% of statutory income for each year of assessment.
  • For existing company, investment tax allowance of 60% for a period of 5 years and can be set-off against 70% ofstatutory income for each year of assessment.
• DRB Hicom to take over a part or fully the operations of TVET institute for automotive cluster in Pekan, Pahang (such ascommunity colleges, Institut Latihan Kemahiran Awam (ILA) dan Institut Kemahiran Belia Negara (IKBN)). This is to providesufficient training program that suit the need of the community.
• Exemption on driving license exam fee for B2 motorcycle, taxi, bus and e-hailing.

Comments

• We are positive on the wide incentives for the EV industry. EVs are slowly but surely gaining attention and interest isheightening as evidenced by the expanding range of vehicles being offered by automakers.
• Battery electric vehicles (BEVs) new launches are expected to be boosted by the sales tax, import and excise dutiesexemption (CKD up to 2027 and CBU up to 2025) and other EV facilities incentives.
• Exemption on driving license exam fee for taxi and e-hailing to-be drivers could spark more volume for the affordablenational segment.
• DRB Hicom taking over a part or fully the operations of TVET institutes provide added value to its ESG initiatives.

Potential Winners/Losers

• Potential beneficiaries for the electric vehicles (EV) exemption and subsidies would be SIME (OP; TP: RM2.60) and BAUTO (OP; TP: RM2.65) given their wide offerings of EV models.
• Potential beneficiaries for the taxi and e-hailing market are Perodua of MBMR (OP; TP: RM4.60), UMW (OP; TP: RM4.95) and Proton of DRBHCOM (MP; TP: RM1.60) given their presence in the affordable market segment.
• Potential beneficiary for aerospace industry tax incentive is UMW (OP; TP: RM4.95) through its subsidiary, UMWAerospace, the first Malaysian company to be a Tier-1 aerospace engine component manufacturer for Rolls-Royce.

Source: Kenanga Research - 25 Feb 2023