Car-retirement incentive: Of road safety, cleaner air, affordability

KUCHING (March 1): The government’s RM4,000 incentive encouraging owners of vehicles over 20 years old to retire their cars represents a logical and timely intervention.

In October last year, Prime Minister Anwar Ibrahim said the government was set to introduce an incentive of up to RM4,000 under Budget 2026 to encourage owners of vehicles aged over 20 years old to replace them with new national cars.

The RM10 million matching grant initiative was launched last month, signifying the government’s efforts to improve road safety and alleviating the cost burden off motorists.

In announcing this, Transport Minister Anthony Loke said initiative should benefit about 5,000 vehicle owners.

He said under the programme, each eligible recipient would receive a matching grant of up to RM2,000, which would be matched by participating local vehicle manufacturers.

This, added the minister, would increase the total incentive received by the public and reduce the overall cost of purchasing a new vehicle.

“Newer vehicles are undeniably safer, cleaner and more environmentally-responsible.

“Advances in structural crash protection, braking systems, and active safety technologies have transformed modern cars into significantly more protective mobility solutions compared with vehicles produced two decades ago.

“At the same time, improvements in engine efficiency and emissions control have reduced pollutants and greenhouse gas output, aligning closely with Malaysia’s longer-term sustainability ambitions, including the national commitment towards carbon neutrality by 2050,” said Dr Rifqi Irzuan Abdul Jalal, an associate professor at the School of Engineering of Faculty of Innovation and Technology, Taylor’s University.

He added that from a road safety standpoint, the justification was ‘compelling’.

“Vehicles designed more than 20 years ago were built to safety expectations that are substantially behind today’s standards,” he pointed out.

“Many lack ‘Electronic Stability Control’, comprehensive airbag systems, and modern crash energy management structures, while child safety provisions such as International Standards Organisation FIX (ISOFIX) anchorages were not universally available.

“Encouraging the gradual replacement of these ageing vehicles reduces exposure to outdated protection levels, and helps lower injury severity and fatality risks in traffic collisions.

“Even incremental improvements in fleet safety characteristics can deliver meaningful public health benefits over time,” he said.

Environmental considerations also provided an equally strong argument, said Rifqi Irzuan.

According to him, older vehicles commonly operate under Euro 2 or earlier emission standards, whereas newer vehicles in Malaysia are required to meet Euro 4 or Euro 5 requirements.

“The reduction in harmful pollutants such as nitrogen oxides, hydrocarbons, carbon monoxide, and particulate matter is significant.

“As higher-emission legacy vehicles are phased out, urban air quality stands to benefit.”

Rifqi Irzuan – an executive committee member of Society of Automotive Engineers Malaysia – also stated that while carbon dioxide reductions could vary depending on engine type and usage patterns, newer vehicles would generally achieve better fuel efficiency and lower emissions per kilometre.

“Fleet renewal, therefore, complements national climate objectives while improving local environmental conditions.”

The economic implications, however, would require a more nuanced discussion, said Rifqi Irzuan, noting that owners of vehicles exceeding 20 years were often from lower-income households.

“For many, an older car is retained not by choice, but necessity,” he pointed out.

“These vehicles are typically fully paid, insurance costs are modest, and replacement, even with the RM4,000 incentive, introduces new financing commitments that may strain monthly cashflow.

“This concern is legitimate and underscores the importance of affordability and accessibility within the policy framework.”

Yet, Rifqi Irzuan argued that the financial comparison was rarely as simple as loan repayments versus no loan.

“Ageing vehicles often impose hidden operating costs that accumulate gradually.

“Older engines tend to consume more fuel, experience declining efficiency, and in some cases, require regular engine oil top-ups.

“Maintenance intervals shorten, component failures become more frequent, and repair unpredictability increases.

“Parts availability may also diminish over time, making proper restoration technically difficult or economically unjustifiable.

“These recurring expenditures can erode the perceived cost advantage of keeping an older vehicle.”

The academician said when viewed holistically, upgrading to a newer vehicle could, under the right circumstances, stabilise household mobility expenses.

Adding on, he said improved fuel efficiency, a lower likelihood of major breakdowns, and fewer unscheduled repairs, could introduce greater predictability into ownership costs.

“For households already managing high spending on fuel, servicing and repeated repairs, the transition to fixed monthly instalments may not represent a significant deterioration in financial burden.”

At the industry level, said Rifqi Irzuan, the initiative might stimulate new vehicle demand and support ‘Total Industry Volume’ (TIV).

The benefits could extend beyond manufacturers to the wider automotive ecosystem, including suppliers, dealerships, service networks, insurers, logistics providers and financial institutions, he added.

“The automotive sector’s multiplier effects across the economy remain substantial, reinforcing employment, technological capability and overall investment attractiveness.

“In conclusion, the RM4,000 vehicle-retirement incentive reflects a positive policy direction with clear safety and environmental merits.

“Concerns regarding affordability, particularly among lower-income households, should not be dismissed.

“At the same time, the rising operational inefficiencies and repair uncertainties associated with ageing vehicles must also be acknowledged.

“The long-term success of the initiative will depend on ensuring that the pathway to safer and cleaner mobility remains both encouraged and realistically attainable,” said Rifqi Irzuan, who specialises in vehicle technology, electrification and mobility systems.