Powering Ahead: An Introductory Overview of the Legal Landscape of Electric Vehicles in Malaysia

Introduction

Electric vehicles (EVs) are rapidly gaining traction worldwide as an eco-friendly alternative to traditional internal combustion engine vehicles. Malaysia, with its commitment to sustainable development and reducing carbon emissions, is also witnessing a growing interest in EV adoption with the entry of American EV giant Tesla and other competing EV manufacturers such as Build Your Dreams (BYD) Auto entering the market. 

The Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz highlighted that Malaysia has more than 100,000 registered EVs to date. By 2024, it is forecasted that the EV market in Malaysia will generate revenues of approximately Ringgit Malaysia 176.5 million. With an anticipated annual growth rate of 4.98%, the market volume is projected to reach Ringgit Malaysia 214.4 million by 2028. Additionally, unit sales within the EV market are expected to reach 4,230 vehicles by 2028. The volume-weighted average price of electric vehicles in 2024 is estimated to be around RM51.7k. project company need only "turn a key" to start operating it). As such, the terms EPC or turnkey are often used interchangeably. 

However, the legal landscape surrounding EVs in Malaysia is still evolving, presenting both opportunities and challenges for stakeholders. 

Legal Requirements of Importing EVs into Malaysia

Presently, there is no single and primary legislation particularly addressing or governing EVs in Malaysia. There are several pertinent legislation and guidelines in relation to the importation of EVs into Malaysia namely the Customs Act 1967 and Road Transport Act 1987. 

Typically, importing vehicles into Malaysia, including EVs can be accomplished through two methods: 

1. Completely Built-Up (“CBU”) – CBU cars are fully assembled and imported from overseas; and 

2. Completely Knocked Down (“CKD”) – CKD cars are delivered in parts and assembled at a local manufacturing company. 

Prior to EVs being made available to the consumers in the local market, there are a few legal and tax requirements that the importers must look out for. Both the importation of CBU and CKD vehicles entail similar processes in Malaysia. 

The first requirement for foreign investor or importer looking to import EVs into Malaysia is to procure an Approved Permit (“AP”) issued by the Ministry of International Trade and Industry (“MITI”). This AP is an import and export license issued by the Permit Issuing Agencies as set out in the Customs Act 1967. Upon approval of the AP by MITI, the company is able to commence the importation process. 

Once AP has been secured, the next step is the importer must register the EVs with the Royal Malaysian Customs Department (“RMCD”), similar to all vehicles operating in Malaysia. This procedure involves submission of the AP, bill of lading document, commercial invoice, and other relevant documents to the RMCD. 

Imported vehicles, whether CBU or CKD, must incur import and excise duties, with CBU vehicles facing heavier levies. Once the importer obtains approval from RMCD, the importer must make payment of the applicable tax and duties to the Inland Revenue Board of Malaysia. The amount of duty and tax depends on the value and type of the EVs and the components used in its assembly.

 At this stage, the importer now has obtained the licence to import EVs into Malaysia. Further down the road, the importer must take into account that like all vehicles, the EVs will need to be registered with the Road Transport Department (“RTD”) or Jabatan Pengangkutan Jalan such as the registration for the application for vehicle type approval (“VTA”) which is a procedure conducted on all vehicle models intended to regulate dimensions, specifications and build characteristics of vehicles used in Malaysia, and to ensure that these compliant with the requirements of the Road Transport Act 1987. 

 Equity Requirements of Importing EVs into Malaysia 

One of the requirements with respect to the application of APs from MITI is a Bumiputera equity requirement. The current policy sets out that 70% of the APs issued by MITI are reserved for Bumiputera-owned companies, while 30% are open to all applicants. 

While equity requirements are implemented with the intention of uplifting and encouraging Malaysian entrepreneurship, it can be argued that this could potentially impede foreign investment in Malaysia. Foreign investors are required to relinquish a portion of their ownership to Bumiputera investors, potentially deterring global car manufacturers from directly entering the local market. Even so, there may potentially be some flexibility regarding the Bumiputera ownership requirement, particularly for EV importers. Tesla's recent milestone in the Malaysian market illustrates this possibility, as the company became the first applicant of the BEV Global Leaders initiative. This initiative, established by MITI to heighten EV demand and foster an ecosystem supporting EV adoption, allowed Tesla to secure an AP while bypassing the Bumiputera equity rule. MITI's more accommodating stance towards potential EV companies could pave the way for others to establish their presence in Malaysia.  

Legal Guidelines of the EV Charging Infrastructure 

With the growing number of EVs on the Malaysian roads comes a growing market for the EV charging infrastructure in Malaysia. As of to date, Malaysia Electric Vehicle Charging Network (“MEVnet”) stated that the number of operational public charging stations in the country stands at 1,430 in 620 locations throughout Malaysia. As outlined in 2021 under the Low Carbon Mobility Blueprint (“LCMB”) 2021-2030, Malaysia is aiming to have 10,000 electric vehicle charging stations (“EVCB(s)”) in place by 2025. The two (2) major guidelines issued in relation to the EVCBs in Malaysia are as follows: 

1. Energy Commission (“EC”) Regulation and Licensing, and Guide on Electric Vehicle Charging Systems (“EVCS”)  

 EC is the national regulator for the energy sector in Malaysia which regulates and promotes all matters relating to the electricity and gas supply industry. EC had issued a guideline called Guide on Electric Vehicle Charging Systems (“EC Guide on EVCS”) which outlines the significant requirements and specifications to be complied with in relation to the installation, operation, maintenance, safety, power quality and licensing for EVCS. This guideline is applicable to anyone who provides or employ any EVCS in Peninsular Malaysia, Sabah and the Federal Territory of Labuan. Whether compliance to this EC Guide on EVCS is compulsory or merely guidance  remains undetermined as it does not currently provide for the repercussions of non- compliance of the same. However, the provisions of the Electricity Supply Act 1990 and  all its subsidiary legislation (such as the Electricity Regulations 1994) will apply as a matter of law to EVCS. 

Additionally, it is mandatory for EVCS operators to obtain EVCS public distribution licence issued by the EC prior to commencing operations pursuant to Section 9 (1) of the Electricity Supply Act 1990. Failure to obtain the same, such charge point operators would be committing an offence pursuant to Section 37 (5) of the Electricity Supply Act 1990 and would be liable upon conviction, to a fine not exceeding RM100,000 and further fine not exceeding RM1,000 for a continuing offence after conviction.  

2. EVCB Planning Guidelines  

The EVCB Planning Guidelines dated 27 September 2023 issued by the Local Government Development Ministry through the Town and Country Planning Department (“PLANMalaysia”) intends to provide a comprehensive guidance to all parties involved in the planning, designing and development process of implementing or deploying EVCBs (including operators and state and local authorities). 

This EVCB Planning Guidelines covers two main aspects which are as follows: 

1. Guidelines on the planning and design of EVCBs, which must comply with the Fire Safety Guidelines for On-Premises EVCBs issued by the Malaysian Fire and Rescue Department; and 

2. Manual OSC 3.0 Plus construction and approval guidelines issued by the Local Government Development Ministry.  

Conclusion 

The legal landscape of EVs in Malaysia is rapidly evolving, driven by the government's commitment to sustainable development and environmental conservation. While challenges remain, the increasing focus on EVs presents significant opportunities for Malaysia to transform its transportation sector and build a more sustainable future. By fostering collaboration between policymakers, industry stakeholders, and the public, Malaysia can position itself as a frontrunner in the global transition to electric mobility.