The new electric vehicle (EV) road tax structure will be 70 to 85 per cent cheaper than the current one, which is not enforced because EVs enjoy a road tax holiday until the end of 2025.
The government yesterday announced that the new EV road tax structure would still be based on battery output and was designed to be competitive with the rate charged for internal combustion engine (ICE) vehicles.
Transport Minister Anthony Loke said the new structure, which will come into effect on Jan 1, 2026, was made to encourage EV adoption in the country.
These are applied only to registered pure battery electric vehicle and fuel cell electric vehicle models.
"According to statistics, there are 15,671 registered EVs on the road as of 2023. This is only one per cent of the total registered cars for the year at 1.53 million vehicles.
"This year (up to April 2024) saw up to 7,003 registration of EVs, which is 1.4 per cent of the total 499,945 registered in the same duration. It is clear that there is more that needs to be done to support the EV transition and engage in our (zero) emissions efforts," Loke added.
The new EV road tax structure is kilowatt (kW)-based and grouped in motor output power bands.
Under it, each power band has its fees arranged in blocks, with each 9,999 watts (or 9.9 kW) block adding on a set price in each power band. The new fees start at RM20 at the very lowest tier, from one watt to 9.9 kW, but this will never be applied given the output of EVs.
Economist Dr Geoffrey Williams said if EVs were better than conventional cars, they would not need subsidies and tax breaks.
He said these policies showed that if it was left to market forces, EVs would struggle.
"The prices of EVs are driven by supply. As they are becoming more available and less of a novelty, their prices will fall and become comparable to normal high-priced cars.
"Demand is affected by price. As EVs become cheaper, they are more affordable and demand rises. People will then look at quality and running costs, as well as the range they can travel on a full charged battery."
He said nonetheless, EVs were still considered luxury products.
"Conventional cars are competitive and will account for the largest share of the market. EVs will always be a small segment of the car market and they will not replace conventional vehicles."
Tradeview Capital Sdn Bhd chief executive officer Ng Zhu Hann said lower EV prices were good for the mass market adoption of zero-emission cars.
"By making EV car prices affordable to the masses, this will help the country to move away from ICE vehicles. In turn, it will ease the fuel subsidy reform process."
In the long run, Ng said the fuel subsidy reform would help the government save money and strengthen its balance sheet.
"The government can use these savings for other expenditures for the nation. Additionally, it is part of Malaysia's agenda to address the climate change issue."
On whether the lower EV road tax rates would affect the sales of ICE cars, Ng said as the former became cheaper, it would impact the latter.
"The manufacturers, be it global or local brands will start pivoting towards EV cars. We foresee the total industry volume for ICE vehicles to decrease as the masses start adopting EVs.
"The transition is happening globally with China leading the way, as the entire automotive industry has done well with EV technology breakthrough via affordable EV cars. Today, China EV manufacturers are working towards exporting their cars globally, including Malaysia."
Malaysia Internet of Things (IoT) Association deputy president Datuk Sri Ganes Palaniapan described EV adoption as a "radical change" that not all road users would welcome with open arms.
He said transitioning to EV hinged on the availability of its infrastructure, such as charging stations, which are being developed.
"The structure now bases road taxes on emissions and vehicle types, meaning that luxury, high-emission vehicles face steeper charges, while eco-friendly vehicles enjoy tax breaks," Ganes told the New Straits Times.
"This could be a necessary step to combat pollution and promote a greener future, but it imposes a financial burden on owners of older vehicles who may not have the means to upgrade (to an EV)."
Ganes urged the government to use IoT technologies for a more systematic management and implementation of road tax systems, especially for EVs.
He said by integrating IoT sensors and devices into vehicles and infrastructure, real-time data on vehicle usage, emissions, and road conditions could be collected and analysed.
"This allows for a dynamic and fair taxation system where the road tax rate can be adjusted based on (an EV's) actual usage and environmental impact, rather than a flat annual fee."