EVs from China will face just a 5% import duty instead of the standard 30% for models from other countries.
With the calendar flipping over to 2026, Malaysia’s electric vehicle (EV) incentive landscape has entered a new phase. This follows the expiry of blanket import and excise duty exemptions for fully imported EVs on 31 December 2025, replaced by a revised tax structure… which is not exactly dissimilar to what came before.
Clarity on the new framework emerged during the Malaysian Automotive Association’s (MAA) 2025 industry review and 2026 outlook briefing, where MAA president Mohd Shamsor Mohd Zain and his council members outlined how CBU EVs will now be taxed. And in very broad terms, the default structure mirrors the pre-incentive regime: a 30% import duty, 10% excise duty and 10% sales tax. The 10% sales tax was never removed and continues to apply.
Beyond the headline numbers however, the finer details are heavily shaped by Malaysia’s many free trade agreements (FTAs). And thanks to the ASEAN–China Free Trade Agreement (ACFTA), CBU EVs imported from China face just a 5% import duty instead of the standard 30%, resulting in a combined 5% import duty, 10% excise duty and 10% sales tax for Chinese-built EVs.
In contrast, FTAs with other markets are less generous. Under ASEAN–South Korea arrangements meanwhile, passenger vehicles remain categorised as “highly sensitive”, meaning Hyundai and Kia CBU EVs continue to face the full 30% import duty.
This distinction is actually somewhat significant, as the majority of EVs currently sold in Malaysia originate from China. That includes not only Chinese brands such as BYD, XPeng and Chery, but also Tesla’s Model 3 and Model Y, both of which are sourced from Gigafactory Shanghai. In fact, even BMW’s newly launched iX1 eDrive20L for Malaysia rolls out from a plant in Shenyang, instead of Germany where the standard-wheelbase counterpart originates.
So what does this mean for prices then? Broadly speaking again, MAA estimates that Chinese-origin CBU EVs could see price increases in the region of 15%. Ongoing price competition in the EV market however has already seen brands offering discounts that exceed this figure, which thereby suggests for many manufacturers to potentially choose to absorb some or all of the added tax burden.
Notably too, Tesla has already confirmed that it will maintain its 2025 recommended retail prices into 2026. It nevertheless remains unclear whether this reflects internal absorption or continued preferential treatment under MITI’s BEV Global Leaders programme, under which Tesla operates without the usual franchise Approved Permits.
Now beyond pricing, the policy shift is clearly intended to nudge manufacturers towards local assembly. Locally assembled, Completely Knocked-Down (CKD) EVs remain exempt from excise duty and sales tax until the end of 2027, with import duty exemptions on components also still in place. Volvo, Mercedes-Benz, BMW, Chery, TQ Wuling, Proton and Perodua already assemble EVs locally, while BYD, Leapmotor, MG and XPeng are expected to follow suit. Incidentally, Zeekr and Volkswagen have also committed, though timelines remain unannounced.
That said, the localisation window is actually somewhat narrow. With CKD incentives only guaranteed for another two years, some brands may opt to ride out the period rather than commit significant capital, particularly if broader policy clarity remains elusive. MAA has, in any case, since confirmed it is currently lobbying for CKD EV incentives to be extended until 2040, aligning with Malaysia’s long-term targets of 20% xEV penetration by 2030, rising to 50% by 2040 and 80% by 2050.
