AMSTERDAM: Malaysia may want to look at using tax incentives to drive the growth of its electric vehicles (EVs) market, which is still in its infancy, as the method has brought tremendous success in the Netherlands, which now has a competitive EV market.

The Dutch government currently offers multiple tax exemptions, including exemption from vehicle purchase tax and vehicle circulation tax, for vehicles with low carbon emission. It also offers a reduction in income taxation for the private use of company cars.

These tax incentives have driven a significant spike in the number of EVs in the country in the five years to August 2014, said Sonja Munnis, senior adviser to the Netherlands Enterprise Agency.

“We saw a significant increase to about 40,000 units of EVs in August 2014, from near zero in December 2010,” Munnix said when met by The Edge Financial Daily last week.

The outstanding sales of the plug-in hybrid electric vehicle (PHEV) version of the Mitsubishi Outlander is also due to the tax incentives offered by the government, according to Mitsubishi Motor Sales Nederland BV, the official distributor of Mitsubishi vehicles in the Netherlands.

“Our sales have been heavily influenced by the lower benefit-in-kind for income taxes for EVs. In 2013, we sold over 8,000 PHEV Outlanders in 10 weeks, and had 12,500 orders for the car,” said its general manager of sales Jan Oosterveld in an interview.

But back in Malaysia, the country has discontinued its tax incentives for completely built-up (CBU) fully-imported hybrid cars and EVs, even though it has extended the exemption of excise duties and import taxes for completely-knocked-down hybrid vehicles to Dec 31 next year. For EVs, the exemption lasts until Dec 31, 2017.

“We used to have a tax exemption in place [for CBUs], but even then it was still too early for EVs. The exemption was given to both hybrids and EVs as they were lumped in one category under the National Automotive Policy (NAP).

“Hybrids had more than a 10-year head start globally, while EVs were just starting out. Since hybrids have already established its presence in Malaysia, the tax exemption was discontinued,” said Malaysia Green Technology Corp (GreenTech Malaysia) built environment vice-president Mohamed Azrin Mohamed Ali.

The NAP has mostly focused on the localisation of the manufacturing for EVs, but Mohamed Azrin said this will not be happening in Malaysia anytime soon.

The focus now is to make Malaysia a market place for EVs, he said, adding that “once we have a vibrant market place, the rest will follow”.

Another issue plaguing EV adoption in Malaysia is the chicken-and-egg argument on whether to bring in more cars or to set up the infrastructure for EVs first.

This issue was also debated in the Netherlands, according to Ritsaart van Montfrans, founder of Dutch EV charging infrastructure service provider, The New Motion, now the largest provider of charging stations in Europe.

“What we did was make an agreement with several parking chains to start basic infrastructure in the big cities in the country,” said van Montfrans, adding that the initial rollout of infrastructure was focused on housing areas, work places, offices and other commercial areas.

Malaysia, said Mohamed Azrin, is emulating this with 30 charging stations set up in the Klang Valley. By mid-2016, he expects up to 300 stations nationwide, positioned around homes, offices, commercial areas and places of worship.

“We are putting up the eggs or the infrastructure, so we will need others to join us and come up with the chickens,” he quipped.

GreenTech Malaysia recently signed a memorandum of understanding with First Energy Networks Sdn Bhd, a unit of Tan Chong Motors Bhd, to expand EV charging infrastructure in Malaysia.

Mohamed Azrin said the first charging station by the collaboration will be set up by year-end.

He said the focus going forward is to create EV awareness through pilot projects like the Cohesive Mobility Solution project, an EV car-sharing programme, and the introduction of electric buses for public transportation in Melaka. Both initiatives will start in 2015.

GreenTech Malaysia, which organised the Amsterdam trip for Malaysian media to see how the Dutch encouraged the adoption of EVs in their country, hopes the government will play its part to implement more policies in the future to make EVs more attractive.

“It’s still a long way to go for the Malaysian EV market,” said Mohamed Azrin.

Malaysia aims to have 100,000 electric cars, 100,000 electric motorcycles and 2,000 electric bicycles in the country by 2020, which GreenTech Malaysia, with the help of its Electricity Mobility Blueprint (EMB) to encourage the set-up of an EV ecosystem, hopes to realise for the country.

The EMB is expected to be approved by the Cabinet by year-end.

This article first appeared in The Edge Financial Daily, on November 10, 2014.