The electric vehicle (EV) market continued to record strong growth in the first quarter of 2026, with EV sales rising 25.1% quarter-on-quarter to 13,359 units, accounting for 7.3% of total industry volume (TIV) of 182,113 units, according to a sector report by MBSB Research.
The research house noted that actual EV penetration in Malaysia is likely higher than official figures reported by the Malaysian Automotive Association (MAA), as sales data from several major EV brands, including Tesla, Zeekr and XPeng, are not captured in the association’s statistics.
MAA’s data includes both passenger and commercial EVs, with reported EV penetration standing at approximately 7% of total vehicle sales.
Policy Direction Shifts Towards Local Assembly
The report highlighted that Malaysia’s EV policy is gradually transitioning from encouraging adoption through tax incentives to promoting localisation and domestic manufacturing.
Under Budget 2022 and Budget 2023, imported completely built-up (CBU) EVs enjoyed import and excise duty exemptions until Dec 31, 2025, while incentives for locally assembled completely knocked-down (CKD) EVs remain in place until Dec 31, 2027.
Beginning July 1, 2026, imported EVs will be required to meet a minimum cost, insurance and freight (CIF) value of RM200,000 and a minimum motor output of 180 kilowatts. The new rules replace earlier expectations that CBU EVs would revert to Franchise Approved Permit (AP) requirements, which included a minimum retail price of RM250,000 and power output of 200 kilowatts.
Vehicles already in transit or held as ready stock before the implementation date will be exempted from the new requirements.
Imported EVs Expected to Move Upmarket
MBSB Research said the new minimum CIF threshold is likely to push most imported EVs into the premium vehicle segment.
The RM200,000 CIF value represents only the landed cost before taxes and distribution expenses. After factoring in import duties, excise duties, sales tax and dealer margins, retail prices could exceed RM300,000. European and South Korean EV models may become even more expensive due to higher import duties.
As a result, the new framework is expected to significantly raise entry prices for imported EVs and accelerate demand towards locally assembled alternatives.
Among the 20 best-selling EV models as of April 2026, only five are largely unaffected by the new regulations. These include the Proton e.MAS 5, Proton e.MAS 7, TQ Wuling Bingo, Volvo EX30 and the premium-priced Zeekr 009.
Local Assembly Reduces Industry Exposure
The report noted that most major EV brands operating in Malaysia are already establishing local assembly capabilities, limiting the impact of the new policy on the broader automotive sector.
Chinese brand iCaur assembles vehicles at Chery’s plant in Shah Alam, while MG and XPeng models are produced through contract manufacturing facilities operated by EP Manufacturing in Melaka.
Leapmotor has begun CKD production at Stellantis’ facility in Gurun, Kedah, while Zeekr plans to establish its own assembly plant in Tanjung Malim by 2027.
Tesla remains the notable exception, as its vehicles continue to be imported as CBUs. However, it remains unclear whether Tesla’s operations will be affected due to its participation under the government’s Battery Electric Vehicle Global Leaders initiative.
BYD could face the greatest impact if its localisation plans do not materialise, as its current models are still fully imported.
Industry Outlook Remains Stable
While the new rules may trigger a temporary surge in purchases before the July implementation date, MBSB Research expects demand to gradually shift towards CKD EVs, internal combustion engine (ICE) vehicles, hybrids and the used-car market as existing inventories are depleted.
Despite evolving policy dynamics, the research house maintained its 2026 TIV forecast at 788,000 units, representing a 4% decline from the previous year and broadly in line with MAA’s projection of 790,000 units.
MBSB Research retained its positive view on the automotive sector, naming MBM Resources Berhad as its top sector pick. The recommendation is supported by the company’s exposure to the mass-market segment through Perodua, favourable foreign exchange movements and an attractive dividend yield outlook.
The research house said Malaysia’s EV market remains on a firm growth trajectory, with localisation efforts expected to strengthen the industry’s long-term sustainability while supporting the government’s broader industrial development goals.
