The Malaysian government has announced a new National Automotive Policy (NAP) initiative to help attract investment in energy efficient vehicle (EEV) production.

The government is making available MYR2bn in the form of soft loans and grants to both local and foreign vehicle manufacturers planning to establish production facilities for EEVs in the country. The funds will be available for personnel development, infrastructure and for tax rebates.

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The new initiative is in response to similar policies introduced in Indonesia and Thailand to promote production of small, low-consumption cars.

As part of the NAP initiative, the Malaysian government will offer manufacturing licences for small cars to foreign manufacturers. Until now, only national car companies have been allowed to produce and sell cars with an engine capacity of less than 1.8 litres. 

The move inevitably will usher in additional competition for the two national car companies, Proton and Perodua. The government is also expected to eventually lower excise taxes to promote local sales. But, on the whole, national car companies are expected to increase exports to maintain their competitive edge.

The government is targeting industry-wide exports in excess of 250,000 cars per year with this new initiative by 2020, from just 20,000 at present, as well as MYR10bn worth of component exports.

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Malaysia’s exact definition of an EEV has yet to be released but it is expected to be in line with the small car initiatives currently in available in Indonesia and Thailand. It will also encompass alternative fuel vehicles including hybrid, electric, bio-fuel and LPG/CNG.