Malaysia's new NCM to link automotive incentives to localisation
Paul Tan, 27 Aug '26
The government's upcoming New Customised Incentive Mechanism (NCM) will use localisation as a key consideration when determining incentives for automotive companies.
The mechanism will provide automakers that build vehicles in Malaysia with higher tax incentives based on their level of localisation, said Investment, Trade and Industry (MITI) Deputy Minister Sim Tze Tzin.
"If you do more localisation, you'll get more tax exemptions. If you do talent development, R&D, that kind of thing, then you will get more tax reduction," he said on the side-lines of the Global Automotive and Technology Expo (GATE) 2026 on August 26th.
He said the incentives could include reductions in excise duties, with companies that make greater contributions to Malaysia's automotive sector potentially receiving higher incentives, according to media reports. "The more they do, the better they get," he said.
Sim said the government wants car manufacturers to localise components, particularly critical components, while investing in research and development and developing local talent. "We want true localisation. The objective is on real localisation," he said, echoing comments made by MITI Minister Datuk Seri Johari Abdul Ghani last month.
The NCM will cover incentives for both internal combustion engine (ICE) vehicles and electric vehicles (EVs) when it is introduced. Sim added that the revised mechanism will be simplified to reduce complexity for businesses while retaining its focus on localisation.
The approach is intended to encourage carmakers to establish a greater presence in Malaysia rather than relying heavily on imports, while supporting the development of the country's automotive supply chain. Sim said higher levels of localisation could result in greater incentives, which could ultimately reduce vehicle prices for Malaysian consumers.
Details of the revised mechanism are still being refined and have yet to be finalised. Sim said the ministry would engage industry players before its implementation. "Good policy needs some time, and we will start engaging with the industry," he said.
The NCM, which has been under development for some time, is scheduled to be implemented next year, a timeline reiterated by Sim. "From next year onwards, the new customised mechanism will come in," he said.
