Malaysia's new auto incentive plan to reward greater localisation
Paul Tan, 31 Aug '26
The government says its upcoming New Customised Incentive Mechanism (NCM) will consider localisation when determining incentives for automotive companies.
The mechanism will provide greater tax incentives to automakers that manufacture vehicles in Malaysia, 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 sidelines of the Global Automotive and Technology Expo (GATE) 2026 on August 26th.
He said the incentives could include reductions in excise duties, with companies making greater contributions to Malaysia's automotive supply chain potentially receiving higher benefits, media sources report. "The more they do, the better they get," he said.
Sim said the government wanted car manufacturers to localise components, particularly critical ones, 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.
Sim said the NCM would cover incentives for both internal combustion engine (ICE) vehicles and electric vehicles (EVs) when introduced. He added that the revised mechanism would be simplified to reduce administrative complexity for businesses while maintaining its focus on localisation.
He said the approach was intended to encourage carmakers to increase local manufacturing activity rather than rely heavily on imports, while supporting the development of the country's automotive supply chain. He added that higher incentives resulting from greater levels of localisation could potentially reduce vehicle prices for Malaysian consumers.
Details of the revised mechanism are still being refined and have yet to be finalised, but 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 implementation of the NCM, which has been under development for some time, is scheduled for next year, a timeline reiterated by Sim. "From next year onwards, the new customised mechanism will come in," he said.
