Kenanga Research has expected gradual transition to battery electric vehicles (BEVs) which currently enjoys tax exemption up until 2027 for locally-assembled completely knocked-down (CKDs) in Malaysia.
“Looking further, we also have a nuanced view of EV adoption eventually picking up and gasoline vehicles demand will eventually peak, but we do not think that will happen in the next five years due to infrastructure challenges,” the research house said in a note on Wednesday.
This new petrol subsidy mechanism, in its view, could make the transition even slower than earlier expected as the middle- and lower- income group now have less incentive to switch from internal combustion engine (ICE) car to EV for the time being.
Recall that, the new registration for BEVs leapt from 274 units in 2021 to over 3,400 units in 2022, 13,301 units in 2023, and 21,789 units in 2024, or 3 percent of total industry volume (TIV).
The BEV registration for January to November 2025 is at 36,690 units, far surpassing 2024 numbers, which were mostly driven by completely built-up (CBU) models.
It is noted that Malaysia aims for EVs to represent 20 percent of new vehicle sales by 2030, with longer-term vision extends to 80 percent by 2050 (including hybrids vehicles).
The government is focused on building out the EV ecosystem, including the rollout of 10,000 public charging points — an earlier 2025 target for which no updated timeline has been provided—although deployment has lagged, with just over 50 percent of the target achieved so far.
A total of 4,477 charging stations have been proposed, with 5,149 built to date, alongside tax incentives to spur adoption and local production.
Looking ahead in 2026, RHB Investment Bank expects EV sales to skew towards CKD EVs given the absence of tax rebates for CBU EVs starting from January 1, 2026.
“However, we note that EV players have started planning for CKD production, such as Xpeng (commencing production at end-1Q26), BYD (CKD plant to be completed in 2026), and e.MAS 7 EV (CKD introduction announced on January 20, 2026),” the research house said in a note on Thursday.
Cited the Malaysian Automotive Association (MAA), EV sales surged 109 percent year on year to 30,800 units, making up 3.8 percent of total TIV for 2026.
Figures from Road Transport Department data differs, with EV car registrations (including non-MAA members) jumped two times year on year to 44,800 units in 2025, accounting for 5.1 percent of total cars registered during the year, from 2.5 percent in 2024.
The spike in EV numbers was led by BYD (14,407 units registered), followed by Proton (8,890 units) and Tesla (7,282 units).
RHB also highlighted that CKD EV momentum continues to build in Malaysia.
It noted that EV manufacturers are increasingly shifting towards local CKD assembly to qualify for tax exemptions until end-2027.
For instance, Xpeng has partnered with EP Manufacturing as its CKD partner in mid-December 2025, with the production of its G6 SUV and X9 MPV scheduled to commence on March 31, 2026 and May 25, 2026 (expected to complete production by the first quarter of 2028).
It noted that EPMB had announced Phase 2 of its Melaka facility, lifting annual capacity to 30,000 units from just 6,000 units, while Phase 3 is targeted for completion by end of the third quarter of 2026.
Additionally, Proton had also just introduced its CKD e.MAS 7, priced at MYR 103,800 ($25934) (Prime) and MYR 119,800 ($299,31) (Premium) which are MYR 6,000 ($1499) and MYR 4,000 ($999) cheaper against their CBU versions, though there is no timeline yet on production.
Meanwhile, BYD had announced plans to establish a CKD facility in Tanjung Malim (on KLK Land), with production targeted to commence in the second half of 2026.
As for CBU EVs tax structure, it is broadly expected that the structure will be as follows: 30 percent
import duty + 10 percent excise duty + 10 percent sales tax, though import duty is influenced by free trade agreements (FTAs) between Malaysia and other countries.
For example, CBU EVs from China will be subject to a 5 percent import duty instead of 30 percent, totaling the duty to be about 25 percent (5 percent + 10 percent + 10 percent).
“However, it is still uncertain on the impact on retail prices. So far, we note that Tesla has revealed its 2026 prices for its CBU EVs – unchanged for Tesla Model 3 and
Model Y,” RHB added.
Meanwhile, TA Securities said in a note on Thursday that rising xEV adoption in Malaysia is diversifying the market, introducing new competitive and pricing dynamics for traditional passenger vehicles.
It is noted that MAA categorizes hybrid vehicles (HV) and EV under the collective brand xEV.
In 2025, xEV sales surged 52.2 percent year on year to 69,400 units, supported by strong growth in both segments.
HV sales rose 25 percent year on year to 38,500 units, while EVs more than doubled, soaring 108.9 percent year on year to 30,800 units.
Tesla remains excluded from EV sales as it is not a member of MAA.
According to TA, xEVs accounted for approximately 8 percent of total TIV in 2025, up from 5.6 percent in 2024.
Pure EVs contributed around 3.8 percent of TIV, reflecting accelerating adoption amid policy incentives.
MAA expects continued momentum in xEV demand, projecting xEV sales to reach 100,000 units in 2026, with HV contributing 51,000 units and BEVs 49,000 units.