Malaysia will stop giving import duty exemptions for fully assembled electric vehicles (EVs) starting Jan 1, 2026.
The Ministry of Finance (MOF) made this announcement in its latest Fiscal Outlook and Federal Government Revenue Estimates report.
The exemption currently applies to completely-built-up (CBU) EVs that are imported fully assembled.
Excise duty collection set to increase in 2026
With this move, Malaysia expects its excise duty collection to rise by 2.3%, from RM12.51 billion in 2025 to RM12.8 billion in 2026.
Excise duties are anticipated to record RM12.8 billion,
underpinned by moderate motor vehicle production, introduction of new vehicle models and intensified promotional activities, as well
as the removal of excise duty exemptions on completely built up (CBU) electric vehicles beginning 2026,” it wrote.
The increase is supported by several factors, including stable car production, new model launches, more marketing campaigns, and the end of the CBU EV exemption.
Background of the exemption policy
The CBU EV tax exemption was first introduced in Budget 2022 to boost EV adoption.
It was originally set to end in 2023 but was extended twice — first to end-2024, and then again to end-2025.
In contrast, the tax exemption for completely-knocked-down (CKD) or locally assembled EVs will remain in place until end-2027.
This is part of a government strategy to support local manufacturing and attract foreign investment in the EV sector.
Local players enter EV market as foreign firms expand
The timing of the policy shift comes as national carmakers join the EV race.
Proton introduced its first EV model in late 2024, and Perodua is expected to follow by the end of 2025.
Foreign automakers are also making moves to set up local EV assembly plants in Malaysia.
Chinese carmaker BYD is building a factory in Tanjung Malim, Perak.
Meanwhile, Stellantis, a major European automaker, has opened an assembly plant in Gurun, Kedah.
Chinese brand Leapmotor, which partnered with Stellantis, will produce its EVs there.
Imported EVs may cost significantly more
Once the exemption ends, fully imported EVs could become 30% to 40% more expensive, depending on their engine capacity and brand.
This means EVs currently priced at RM150,000 may see price hikes of RM45,000 or more starting 2026, unless automakers absorb part of the cost or shift to local assembly
Currently, excise duties for imported ICE vehicles in Malaysia are tiered based on the engine capacity, ranging from 75% for engines below 1,800 cc to 105% for engines above 2,000 cc and not exceeding 2,499 cc.
Policy aims to push local EV manufacturing
The end of duty-free imports is meant to encourage automakers to build EVs locally rather than rely on imports.
It also supports the government’s long-term plan to develop Malaysia into a regional EV hub.
