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Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come?

Hans · Dec 17, 2020 10:00 AM

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 01

The Malaysian government is drafting a proposal to tighten requirements to qualify for excise tax deductions under the Energy Efficient Vehicles (EEV) program.

EEV is a tax incentive package for fuel efficient, locally-assembled cars. Not to be confused with EV (electric vehicles), EEV is technology-neutral and encompasses all types of powertrain.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 02

Exhaust emissions had to be tested and validated at a certified lab, at the cost of the manufacturer. Malaysia only has one emissions testing lab - NETC in Rawang

Currently, EEV incentives are decided on a case by case basis, based on several factors including (but not limited to) the value of project and economic benefit to the country, as well as claimed fuel consumption versus the vehicle’s kerb weight.

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Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 01

Investment value aside, current EEV standard only looks at claimed fuel consumption figures

All EEV applications are vetted through by MARii (Malaysia Automotive, Robotics and IoT Institute), which is the country’s focal point for all auto policy-related matters.

However, the actual approval of EEV incentives is done by both the Ministry of International Trade and Industry, and the Ministry of Finance.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 02

Currently, many popular locally-assembled models already qualify for EEV incentives, including the Perodua Axia, Perodua Myvi, Toyota Yaris, Toyota Vios, Honda City (including latest 2020 model), Honda Jazz, Honda HR-V, Proton X50, Proton X70, Honda Civic, and even the Isuzu D-Max.

WapCar.my understands that several relevant government bodies are now in discussion with the Malaysia Automotive Association (MAA) to raise the requirements of EEV to be in line with those used by neighbouring countries.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 03

Thailand's CO2 emission-based excise tax structure

Thailand for example, has since 2016, replaced its previous engine capacity-based excise tax structure with one CO2 emission-based one.

This is the main reason why the Thailand market Honda City uses a downsized 1.0-litre three-cylinder VTEC Turbo engine while our Malaysian City uses a 1.5-litre naturally aspirated 4-cylinder, and why Thailand’s Toyota Camry uses the newer Dynamic Force series engine while the we continue with the older 2AR-FE engine.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 04

CO2 tax is why Thailand's Honda City uses a different 1.0L three-cylinder VTEC Turbo engine

Indonesia is also expected to announce CO2 tax within the next few years as part of the country’s push to promote local assembly of hybrid and electric vehicles.

Until Malaysia moves its tax structure to penalize higher emissions engines/incentivize cleaner emissions ones, we will continue to get older engines.

However, be careful of what you wish for, because low CO2 emission engines lack power and even on ones that appear to be powerful enough on paper, their real-world performance is rather disappointing.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 05

Thailand's Toyota Yaris uses a smaller 1.2L engine, for CO2 tax reason. Can Malaysians accept it?

To keep emissions low, many of these newer generation engines are tuned to have a less immediate throttle response but between power and fuel efficiency, Thai consumers overwhelmingly choose the latter. You would too if you are paying RM4 per litre of petrol, and yet Malaysians complain about high fuel prices.

The proposal for the revised EEV criteria has yet to be approved so nothing is final yet, but based on documents sighted by WapCar.my, the new criteria is proposed to kick in by 2025. But the targets look easy enough to be cleared by most current generation engines.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 06

EEV is not just for passenger cars. Even the CKD 1.9L Isuzu D-Max is an EEV approved vehicle

Manufacturers can express a sigh of relieve as there won’t be any of those fleet-wide average CO2 emission targets adopted by Europe or Japan.

The proposed CO2 targets range from 100 g/km for cars weighing 800 kg, to 225 g/km for cars weighing 2,270 kg. The weight bracket increases in 110 kg increment, while CO2 emission are raised by between 7 – 10 g/km for each subsequent weight category.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 07

Our local Honda City with a new 1.5L DOHC naturally aspirated engine has no problem meeting the proposed CO2 emission target (hybrid RS variant shown) 

Most current generation B-segment cars weighing above 1,100 kg already emit less than 100 g/km, so this is not a problem at all.

For example, Thailand’s Honda City with a 3-cylinder 1.0-litre turbocharged engine weighs between 1,150 – 1,165 kg. It has a claimed CO2 emission of under 100 g/km.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 08

Honda Malaysia doesn’t provide CO2 emission for our local City, but we know that the previous generation City that was sold in Thailand with the similar 1.5-litre naturally aspirated SOHC engine (our current generation City uses DOHC) had a CO2 emission rating of 133 g/km – well within the proposed target.

Malaysia’s proposed CO2 emission target for 1,130 kg and 1,250 kg weight categories is 125 g/km and 132 g/km respectively, meaning the newer DOHC naturally aspirated engine used by our latest Honda City (Malaysia specs weigh between 1,125 – 1,135 kg) should be able to clear it with some mild tweaks.

Meanwhile, fuel consumption target is 5.4-litre/100 km and 5.7-litre/100 km for the same two respective weight categories.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 09

Our Malaysian specs Honda City has a claimed fuel consumption of 5.4-litre, so yes it can still meet the new requirements.

In other words, the proposed CO2 emission standard is too lax and the status quo will remain. There is no stronger incentive for manufacturers to introduce higher cost but cleaner engines here.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 10

Remember than 60 percent of Malaysia’s circa 600,000 cars per year market is controlled by Proton and Perodua, so the returns don’t justify the additional investment required for local assembly of newer generation engines.

So why bother with it then? Let’s pause for a moment and not throw the baby out with the bathwater. For what it is, the automotive policy is at least heading towards the correct direction.

We have to start somewhere but legacy issues with Perodua and Proton mean that the country cannot make drastic changes.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 11

60 percent of Malaysia’s new car sales are contributed by Proton and Perodua. Out of those, close to 85 percent of the sales are contributed by entry-level models, all of which are powered by older generation engines that meet only up to Euro 4 emission standards.

The majority of Proton’s sales come from the ageing Saga, Persona, Iriz and Exora and these cars’ older platforms cannot accommodate the newer engines from Geely. It’s a similar situation with Perodua.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 12

Every major automaker offer hybrid variants in Thailand now, buoyed by tax incentives 

Cleaner engines are costly and there’s no two ways about it. More sophisticated engines are more expensive to build and budget brands like Perodua will find it hard to add mild-hybrid tech without bumping up prices.

Non-national brands, which are already taxed more, have little reason to offer the latest tech, which definitely costs more to local buyers. Remember that our sales tax and excise tax are levied in a tax-upon-tax structure. So a small RM 500 increase in cost can quickly balloon to RM 2,000 to the end-user.  

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 13

Clean emisions engines need clean fuel

Then there’s our fuel policy. Our RON 95 petrol is only rated at Euro 4M (sulphur content no more than 50 ppm, parts per million).

Ideally, CO2 emissions-driven initiatives need to be matched by an equally stringent fuel policy road map, which Malaysia currently lacks.

Consumers often ask why Malaysian car buyers always miss out on newer engines. The simple reason is because of our lax regulations, not just in terms of emissions, but also road infrastructure and traffic regulations.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 14

The more advanced a vehicle is, the more important it is to make sure that the vehicle operates in a regulated environment, and that it is maintained according to a certain standard, the latter also implies paying higher hourly wages to technicians with a higher level of certification.

Clean emissions engines need cleaner fuels to run properly. Advanced driving assistance (ADAS) safety systems requires the road network to meet a minimum level of maintenance – road markings, lighting, as well as for drivers to adhere to traffic regulations, speed limits and lane discipline for example. The computer expects drivers to drive properly, because that’s just logical.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 15

Out of that boundary, the computer can’t work. AEB and Lane Keeping Assist for example, is disabled once it triggers too many times, because the software would assume that something must be wrong. It can’t accept that such an idiot is allowed to be behind the wheel.

The manufacturing world hinges on the principle of maximum parts commonality. It makes no sense for a manufacturer to make a car that pairs the latest features with an older generation, higher emissions engine.

Malaysia mulls CO2 emission as requirement for EEV, more hybrids to come? 16

Nissan Almera is RM 5k more expensive than Honda City, because unlike Honda, Nissan doesn't have a simpler NA engine for less regulated countries like Malaysia.

The highest level of features are usually tied to the most advanced engines, and in today’s world, it means hybrids, but over here, consumers are still stuck in a 1990s mindset of chasing for power, because we don’t have fuel tax/carbon tax to change that demand.

As the industry trend towards electrification and driverless cars, the dichotomy between our local car market versus what is required before we can adopt the next generation of cars, will leave Malaysia even more as a dumping ground for old engines and models.

Hans

Head of Content

Over 15 years of experience in automotive, from product planning, to market research, to print and digital media. Garages a 6-cylinder manual RWD but buses to work.

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