EV Tax Holiday Ends: CBU EVs to Lose Duty-Free Status from 2026

Imported electric vehicles (EVs) will no longer enjoy tax-free entry into Malaysia starting next year, as the government phases out excise duty exemptions for fully built-up (CBU) models, reported The Edge.

According to the Ministry of Finance’s Fiscal Outlook and Federal Government Revenue Estimates report, the excise duty exemption on imported EVs will end on Dec 31, 2025. The ministry expects excise duty collection to rise 2.3% to RM12.79 billion in 2026, partly due to the end of the tax break.

The move comes despite calls from the Malaysian Automotive Association (MAA) to keep the incentives longer. MAA president Mohd Shamsor Mohd Zain had urged the government to maintain the exemptions until 2027 for imported BEVs and 2030 for locally assembled ones.

He said this was crucial to sustain sales momentum and attract long-term investment, as EVs made up only 4% of total vehicle sales in 1H25 — even though numbers have nearly doubled year-on-year.

The expiry is expected to trigger a rush in CBU EV sales through 2025 as buyers and distributors race to take advantage of the final tax-free year.

Brands that rely heavily on imported models such as Tesla, BMW, Mercedes-Benz, Kia, XPeng and Hyundai are expected to post record deliveries before the deadline. Prices are likely to climb once excise duties return in 2026. CBU EVs will be subject to an additional 30% Import Duty and an Excise Duty ranging between 10% to 30%, on top of the existing 10% Sales Tax.

While imported EVs lose their exemption, locally assembled (CKD) models will continue to enjoy full tax breaks until the end of 2027. This is already pushing more automakers to localise production.

Proton and Geely are developing the Automotive Hi-Tech Valley in Tanjung Malim, while Perodua is preparing its own EV plant in Rawang.

BYD is partnering with KL Kepong on an assembly site in Tanjung Malim, Chery is investing in Lembah Beringin, Leapmotor will assemble EVs with Stellantis in Gurun, GWM is working with EPMB in Melaka, and Wuling is teaming up with Tan Chong Motor in Segambut.

Not every brand has confirmed local assembly plans, and the industry now wants clarity on what happens after 2027. Many say the current two-year incentive window isn’t enough to recover the high cost of setting up production lines.

Attention is now turning to which models these brands will assemble locally once the exemption ends. BYD, for instance, is unlikely to build all seven of its models here.

Some will probably stay as imported CBUs at higher prices, or be dropped from the lineup entirely.

Based on current popularity, Proton is likely to produce the e.MAS 5 and 7, Perodua the Q-EV, BYD the Atto 3 and Atto 2, Chery the E5, Leapmotor the C10, Wuling the TQ Bingo, and GWM the Ora Good Cat.

Some brands may also use the shift to refresh their range with newer models.

The end of CBU exemptions marks a turning point in Malaysia’s EV journey. Consumers will likely face higher prices from 2026, but the move should help strengthen local manufacturing and attract deeper investments.

The question now is whether this is the right step as Malaysia works toward its goal of 20% xEV market share by 2030 and 50% by 2040.