Malaysia Introduces Enhanced Auto Industry Incentives to Encourage Expansion among Local Firms

May 2021

In an effort to amplify the new generation of automotive technology and products in the country, the Malaysian government has announced the extension and enhancement of the automotive industry incentive. To date, the government, through the Malaysian Investment Development Authority (MIDA), has evaluated and approved tax incentives valued at MYR 4.6 billion (USD 1.12 billion) involving 13 automotive projects since 2014. The extended and enhanced incentive is currently opened for application until 1 December 2025.

The main objective of the extended incentive is to encourage investments in Energy Efficient Vehicles (EEVs), with an additional scope of activities introduced encompassing a range of high-tech and high-value products including Next Generation Vehicle (NxGV), electric vehicles (EVs) and related component as well as core and critical components such as engines, powertrains, light detection and ranging (LIDAR), radio detection and ranging (RADAR) and advanced driver-assistance systems (ADAS).

Aside from attracting new investments, the incentive is expected to grow local automotive industry players and vendors by nurturing local companies in technologies capabilities, certification and human capital development; utilizing and developing local expertise and service providers; as well as supporting local engineering and manufacturing companies such as special processing providers, jigs and tooling manufacturers, components and part manufacturers, and engineering designs.

With the relaxation of criteria and conditions for the incentive, more homegrown companies are likely to explore opportunities in expanding their supply chain in the region by venturing into new high-tech and high-value-added products. The new incentive is considered timely, given the rapidly evolving automotive industry in ASEAN. Countries in the region continuously innovate policies and strategies to attract investments, particularly for EVs. Amid the development, Malaysia is poised for positive spillover effects such as high-value jobs, an increase in R&D activities as well as the transfer of technology and knowledge to the local industry ecosystems. This will also solidify Malaysia’s position as an attractive investment destination for automotive industry players worldwide and a hub for energy-efficient vehicles.

(Sources: MIDA; The Malaysian Reserve; The Edge Markets)

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