Budget 2026: Analysts Split on Lemon Law and EV Tax Shifts

Malaysia’s plan to introduce Lemon Law protection and end tax exemptions for imported electric vehicles (EVs) has drawn differing views from analysts, with some seeing it as a confidence boost while others expect near-term challenges.

According to Bernama, RHB Investment Bank believes that including Lemon Law provisions under the Consumer Protection Act 1999 will help strengthen consumer confidence and raise industry standards. The move, it said, will protect buyers from defective vehicles and promote greater transparency in the market.

RHB added that Proton and Perodua are among the carmakers best positioned to comply due to their strong after-sales networks, established quality systems and production scale. 

It described the move as structurally positive for the industry, but kept a neutral outlook overall, noting that total industry volume (TIV) is expected to moderate as sales normalise and competition among non-national brands intensifies.

Meanwhile, Kenanga Investment Bank viewed the government’s decision to end excise duty exemptions for completely built-up (CBU) EVs as a positive development for national brands, which already enjoy higher localisation rates and government purchase incentives.

Starting Jan 1, 2026, imported EVs will face import duties of 10%–30% and excise duties of 50%-100%. Kenanga said this could spur forward buying ahead of the change, supporting its projection of more than 800,000 vehicle sales this year. 

It also noted that new excise duty regulations could lift prices of locally assembled cars by 10%-30% once implemented.

Both banks agree the Budget 2026 measures mark an important step in balancing consumer protection and market competitiveness, though opinions differ on how quickly the industry can adapt.