BMI Industry Research, a FitchSolutions firm, has projected that Malaysia’s total electric vehicle (EV) sales to quadruple in 2023, although the country’s EV penetration rate (EV sales as percent of total vehicle sales) will stay at just 1.8 percent.

The research unit said in a note on Tuesday that its autos team estimate demand for EVs in Malaysia to far outstrip that of internal combustion engine cars within the 2023-2032 forecast period.

However, BMI noted the pace of growth in the electrification of transport industry will face challenges related to the lack of affordable EV models and slow expansion of charging infrastructure.

It is noted that Malaysian government is promoting EVs by providing import duty exemptions for components for the local assembly of EVs, the excise duty and sales tax exemptions for locally assembled EVs, and the import and excise duty exemptions on imported completely built-up (CBU) units.

While the government’s recently announced National Energy Transition Roadmap (NETR) has recognized the importance of hydrogen as a potential clean energy source, BMI opined that the adoption of hydrogen in the transport sector will be a lengthy process and impact on conventional fuel consumption will be limited.

As part of the country’s objective to achieve net-zero emissions by 2050, the Malaysian government adopted the NETR to steer Malaysia’s transition from traditional fossil fuels-based economy to a green economy.

According to the note, decarbonization of the land transport industry remains critical to the government’s energy transition initiatives since the sector is the largest source of emissions constituting 85 percent of total transport emissions.

“The government’s current policy focuses on electrification of transport fleet and expanding biofuels use and this is expected to become more prominent in the coming years in the form of fuel switching to accelerate energy transition in the transport sector,” BMI said.

BMI also foresees Malaysia’s energy transitions initiatives to slow refined fuel demand growth.

“Malaysia’s fuel consumption is projected to grow at a much slower pace than anticipated,

“Malaysia’s consumption of refined fuels is forecast to see slow and steady expansion over the next 10 years, averaging at around 1.5 percent through 2023 to 2032,” it said.

This was despite its Country Risk teams forecast Malaysia’s real gross domestic product (GDP) growth to register 4.2 percent in 2023 and improve further to 4.42 percent in 2024.

“Though an improving economy together with ongoing fuel subsidies are contributing to a recovery in fuel consumption, fuel demand faces downside pressures from high global oil prices and energy transition initiatives,

“The near-term outlook for fuel consumption points to upside, but the pace of demand growth could slow down in the long term as the government plans to implement policies aiming to cut fuel subsidies and accelerate energy transition initiatives,” it added.

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