Malaysia Tightens EV Import Rules to Push Local Assembly and Supply-Chain Investment

Malaysia’s government has sharpened its electric vehicle policy to favour local manufacturing over imports, raising duties on fully built-up EVs and extending tax exemptions for locally assembled models, according to the Malaysian Automotive Association (MAA). The shift comes as regional competition for EV investment intensifies, with Thailand and other ASEAN neighbours aggressively courting automakers.

MAA president Mohd Shamsor Mohd Zain said the revised framework carries a clear message to manufacturers: shift from completely built-up (CBU) imports to local assembly, technology transfer and deeper domestic supply-chain participation. Shamsor, who is also marketing director of UMW Toyota Motor Sdn Bhd, said Malaysia’s approach differs in method from Thailand’s decision to raise excise taxes on imported EVs, but the underlying objective is the same.

Duties Rise, Exemptions Extended for Local Assembly

Under the current structure, fully imported EVs face a 30 per cent import duty, a 10 per cent excise duty and a 10 per cent sales tax, according to Shamsor. By contrast, locally assembled completely knocked-down (CKD) EVs continue to benefit from full tax exemptions until the end of 2027.

The government has also raised the minimum cost, insurance and freight value threshold for imported EVs from RM100,000 to RM200,000. Shamsor described the measure as a further signal of the government’s preference for domestic investment. “This gives a clear signal to manufacturers that the government wants to encourage more local assembly and investment, rather than depending mainly on imported EVs,” he said.

The policy framework also encompasses the New Customised Incentive Mechanism and revised EV approved permit guidelines for CBU vehicles, which Shamsor said are oriented towards higher technology content, deeper localisation and greater value creation within Malaysia.

EV Sales Surge, but Adoption Lags Regional Peers

Malaysia’s EV market is expanding rapidly even as its overall adoption rate trails several ASEAN neighbours. PwC data cited by MAA showed that sales of all electrified vehicle types in Malaysia more than doubled to 39,000 units in 2025, yet adoption stood at just five per cent, compared with 44 per cent in Thailand, 36 per cent in Vietnam and 21 per cent in Indonesia.

Road Transport Department registration data for the first eight months of the current year showed 47,508 battery EVs registered, up approximately 103 per cent year-on-year from 23,396 units in the same period in 2025. August alone set a monthly record, with EV registrations rising 155.2 per cent year-on-year and accounting for 11.43 per cent of total vehicle registrations that month.

Proton leads the domestic market, having registered 21,841 EVs in the January-to-August period — nearly three times BYD’s 7,472 units over the same span.

Kenanga Research separately noted that battery EV new registrations have grown from 270 units in 2021 to 2,600 in 2022, 10,000 in 2023, 21,789 in 2024 and 44,813 in 2025, equivalent to 5.5 per cent of total industry volume. The firm said Malaysia targets EVs at 20 per cent of new vehicle sales by 2030, rising to 80 per cent — including hybrids — by 2050.

On charging infrastructure, Kenanga Research noted that the government has revised its national public charging target to 30,000 points by 2030, up from an earlier goal of 10,000 by 2025. As of July 2026, 6,904 public charging bays had been installed, comprising 4,665 AC chargers and 2,239 DC chargers.

Implementation Timing Seen as Critical

MAA cautioned that the broader effects of the policy shift would take time to materialise. Shamsor acknowledged that some manufacturers have already begun moving into local assembly, but said wider investment and localisation would require a measured transition period, particularly for companies that have already committed capital to Malaysian operations.

“For existing manufacturers that have already invested in Malaysia, a smooth transition is also important to support continued investment,” he said. The association said a balanced approach with sufficient lead time would be essential for Malaysia to deepen its EV ecosystem while remaining an attractive destination for future investment.

Kenanga Research added a note of caution on broader consumer uptake, saying it does not expect internal-combustion-engine demand to peak within the next five years, citing infrastructure constraints and the country’s subsidised fuel pricing mechanism, which it said provides limited incentive for middle- and lower-income groups to switch to EVs.