KUALA LUMPUR, July 3 — The Malaysian government said rising prices and the introduction of road tax for electric vehicles (EVs) from 2026 will not derail the country’s transition to green mobility, as it shifts its policy focus from imported EV incentives to strengthening local manufacturing.

Responding to a parliamentary question from Gua Musang MP Mohd Azizi Abu Naim, the Ministry of Investment, Trade and Industry (MITI) said the government’s EV strategy aims to balance the rapid adoption of electric vehicles with the development of the domestic automotive industry while maintaining fiscal sustainability.

MITI said Malaysia had granted a 100% exemption on import and excise duties for completely built-up (CBU) imported EVs from 2022 to 2025, resulting in an estimated RM3.3 billion in forgone tax revenue.

As the incentive period ends, the government is shifting towards a more sustainable industrial development strategy by prioritising locally assembled EVs.

To encourage domestic assembly, strengthen the local vendor ecosystem, facilitate technology transfer and create more high-skilled jobs, the government will continue providing full exemptions on import duty, excise duty and sales tax for locally assembled EV models until Dec. 31, 2027.

MITI noted that vehicle prices remain the responsibility of manufacturers based on their commercial strategies. However, it expects any future price increases to be concentrated among imported CBU EV models, while locally assembled EVs should remain more competitively priced due to the continued tax incentives.

On road tax, the ministry said the exemption from the Motor Vehicle Licence (LKM) for EVs until Dec. 31, 2025 was introduced as a temporary measure to encourage early adoption.

From Jan. 1, 2026, EV owners will be subject to a new road tax structure based on motor power output measured in kilowatts (kW). The revised structure is intended to create a fairer and more balanced taxation system while continuing to support the transition to low-carbon transportation.

MITI expressed confidence that the revised road tax and pricing environment would not slow EV adoption, citing three key factors.

First, the total cost of ownership for EVs remains lower than conventional internal combustion engine (ICE) vehicles due to reduced charging and maintenance costs.

Second, EV prices are expected to become increasingly competitive as local production scales up, market competition intensifies and battery technology advances.

Third, the continued expansion of Malaysia’s EV charging infrastructure is expected to boost consumer confidence and accelerate EV adoption nationwide.

The ministry said it would continue reviewing the effectiveness of existing EV policies and incentives to ensure the country’s EV ecosystem supports Malaysia’s decarbonisation agenda while strengthening the domestic automotive industry, attracting high-quality investments and creating high-value economic opportunities.