MIDF Research: Malaysia's EV Market Faces Key Challenges as Tax-Free Window Closes

The Malaysian automotive sector is facing a complex and competitive environment as it contends with policy ambiguities and an evolving market landscape.

MIDF Amanah Investment Bank Bhd (MIDF Research) has retained a Neutral rating on the sector, forecasting a year-on-year dip in Total Industry Volume (TIV) for 2024, with a projected volume of 790,000 units.

This 8% decline in the latter half of the year is largely attributed to a natural tapering off after a period of high sales.

In terms of stock preferences, MIDF Research has identified Bermaz Auto Bhd (BAUTO) and Sime Darby Motors Sdn Bhd as top picks.

Now with Budget 2025 not introducing new incentives or extending import and excise duty exemptions on completely built-up (CBU) EVs, set to end in 2025 - we will surely see last-minute surge in demand as buyers look to capitalise on tax-free deals before the exemption period expires.

Local brands are making strides to meet demand in this shifting landscape. Perusahaan Otomobil Kedua Sdn Bhd (Perodua) is in talks with the Ministry of Investment, Trade and Industry (MITI) to introduce an EV priced below RM100,000, aligning with Proton’s upcoming launch of its first EV, the e.MAS 7, expected by Dec 2025.

These moves are anticipated to align with the government’s push for local CKD EV assembly, which continue to enjoy excise and sales tax exemptions until the end of 2027, providing a longer runway for local assembly investments with incentives.

However, at Carz.com.my would like to further add that the availability of local EV offering does not necessarily result in mass EV adoption as EV ownership is entirely reliant on the charging eco-system and a change of lifestyle which the country is still not ready for especialy the B40 and lower M40 group.

As we approach 2026, EV sales could see a strategic realignment toward local brands, given the limited commitments from other popular brands with EVs in its portfolio to establish local CKD operations. Without new incentives or extensions on tax breaks, it’s imperative for the government to act before the end of 2025 to encourage foreign EV manufacturers to set up CKD operations in Malaysia.

It is also fair to note that as of now there are no EV models that are CDK assembled in Malaysia. The closest news to a EV CKD effort was an announcement from Neta Malaysia with its Q1, 2025 Neta Aya CKD roll-out back in Apr 2024.

If not, we may witness a market pivot to hybrids and plug-in hybrids (PHEVs), which offer extended driving ranges via both electric and petrol propulsion systems—a solution appealing to consumers wary of the full-tax implications on EVs which will technically be significantly higher based on pre-subsidy prices we witnessed before.

Already, several PHEV models are slated for launch later this year and in 2025, underscoring the industry’s readiness to adapt to both consumer demands and regulatory changes.

In the near term, analysts predict that the fourth quarter of 2024 (4Q24) may show softer sales compared to last year, despite traditionally strong year-end sales pushes. However, affordable models like Perodua’s may remain resilient, while non-national brands brace for fierce competition as new entrants vie for market share.