Apex Securities has foreseen slower electric vehicle (EV) demand growth in Malaysia this year amid policy changes.

The research house said in a note on Wednesday that EV demand is expected to pivot toward completely knocked down (CKD) models following the removal of tax exemptions for complete built-up (CBU) EVs from Jan 1, 2026.

In response, original equipment manufacturers (OEMs) have accelerated localization efforts to defend pricing, with XPeng targeting CKD rollout by end-1Q26, BYD completing its CKD plant in 2H26, and Proton introducing CKD production for its e.MAS 7.

“During this transition period, EV demand is likely to remain uneven, with brands such as BYD potentially facing softer 1H26 sales momentum while awaiting CKD ramp-up,” it noted.

While Perodua’s launch of its first homegrown EV (QV-E) in late 2025 marks the initial phase of mass-market EV participation, it opined that broader adoption is expected to remain measured, constrained by charging infrastructure limitations.

“As a result, EV growth in 2026 is likely to be driven primarily by localization-led pricing normalization rather than a step-change in underlying demand, effectively capping EV penetration upside for the year,” said the research house.

It is noted that following the expiry of the CBU EV tax exemption in Dec 2025, imported EVs are now subject to a 10 percent excise duty, alongside import duties that vary by country of origin and applicable free trade agreements (FTAs), and a 10 percent sales tax.

In aggregate, the CBU EV tax structure is broadly expected to amount to about 30 percent import duty + 10 percent excise duty + 10 percent sales tax, although effective rates may be lower for certain origins.

“We understand that several major EV brands front-loaded inventory equivalent to up to four months of sales ahead of the policy change, which should delay any meaningful price revisions until 2H26,

“In the interim, some OEMs may also absorb part of the cost increase given the intensely competitive EV pricing landscape,” Apex Securities noted.

Malaysia’s Road Transport Department (JPJ) data showed EV registrations doubling year on year to 44,800 units in 2025, representing 5.1 percent of total vehicle registrations (from 2.5 percent in 2024).

BYD led the market with 14,407 units registered, cementing its position as the dominant EV player on competitive pricing and product breadth.

This was followed by Proton (8,890 units), supported by strong acceptance of its e.MAS lineup, and Tesla (7,282 units) which continues to attract demand at the premium segment.

In addition, emerging Chinese brands such as XPeng (1,536 units) recorded smaller but rapidly growing registration volumes, highlighting rising fragmentation and competition within the EV space.

Apex Securities also highlighted that charging infrastructure remains a gating factor.

According to the Energy Commission Malaysia (ST), Malaysia currently has fewer than 6,000 public EV charging points nationwide with DC fast chargers heavily concentrated in the Klang Valley and major highways.

This remains well below the government’s 10,000-charger target by end of 2025 under the Low Carbon Mobility Blueprint (LCMB) 2021–2030, largely due to slower-than-expected AC charger deployment.

“As a result, EV adoption remains urban-centric, skewed toward second car households, fleet operators and early adopters rather than broad-based mass-market penetration,” said the research house.

Analysts foresee gradual transition to battery electric vehicles in Malaysia