KUALA LUMPUR, Jan. 29 (Xinhua) -- Malaysia's electric vehicle (EV) market is set for a strategic cooling period in 2026 as new tax policies force a shift from imported models toward local assembly, said analysts.
Apex Securities said in a note on Wednesday that EV demand in Malaysia 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.
It noted that original equipment manufacturers (OEMs) in Malaysia have accelerated localization efforts to defend pricing, with XPeng targeting CKD rollout by the end of the first quarter of 2026, BYD completing its CKD plant in the second half of 2026, and Proton introducing CKD production for its e.MAS 7.
"During this transition period, EV demand is likely to remain uneven. While Perodua's launch of its first homegrown EV in late 2025 marks the initial phase of mass-market EV participation, broader adoption is expected to remain measured, constrained by charging infrastructure limitations," said the research house.
As a result, Apex opined that 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.
Road Transport Department data showed EV registrations in Malaysia doubling year-on-year to 44,800 units in 2025, representing 5.1 percent of total vehicle registrations (up from 2.5 percent in 2024).
The research house also highlighted that charging infrastructure in Malaysia remains a gating factor.
According to the Energy Commission Malaysia, Malaysia currently has fewer than 6,000 public EV charging points nationwide, well below the government's 10,000-charger target by the 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 Apex.
Meanwhile, TA Securities said that rising xEV adoption in Malaysia is diversifying the market, introducing new competitive and pricing dynamics for traditional passenger vehicles, and xEV is a general term for various electrified vehicles, including hybrid EVs (HEVs), plug-in hybrids (PHEVs), and battery EVs (BEVs).
According to the research house, xEVs accounted for approximately 8 percent of total industry volume in 2025, up from 5.6 percent in 2024.
Malaysia Automotive Association (MAA) expects continued momentum in xEV demand, projecting xEV sales to reach 100,000 units in 2026.
Kenanga Research also said in its recent note that it expects a gradual transition to BEVs, which currently enjoy tax exemption up until 2027 for locally-assembled CKDs.
"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," said the research house.
This new petrol subsidy mechanism, in Kenanga's 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) to EV for the time being. ■