A source close to the investment, trade and industry ministry said the move is designed to redirect incentives toward locally assembled, completely knocked-down (CKD) EVs, in order to spur industrial growth, job creation and stronger supply chains.
Putrajaya has over the past four years offered major tax incentives for fully imported EVs.
Under the policy, CBU units were exempted from import and excise duties, making them significantly cheaper.
The incentives were not restricted to any one country or company, and have benefitted a wide range of manufacturers from China, Europe, Japan, Korea and the US.
The Treasury is understood to have given up some RM3.3 billion in tax revenue during the incentive period.
However, the source said that aspect of the policy was always meant to be temporary.
“The incentive period (for CBU units) officially ended in December 2025, meaning imported EVs are now returning to the original tax structure.
“CKD vehicles, will continue to enjoy existing incentives,” the source said.
The move reflects a broader policy shift from merely boosting EV sales to encouraging stronger local economic spillover effects, the source added.
“That means more local assembly, more jobs, stronger local vendors, technology transfer, after-sales capability and investment in the broader EV ecosystem.”
The shift also comes amid concerns over Malaysia’s rising automotive import bill, which reached nearly RM50 billion between 2022 and 2025.
“For policymakers, this raises a bigger question: should Malaysia continue using public revenue mainly to make imported vehicles cheaper, or should incentives be used to build more local industrial value?” a ministry insider said.
The insider told FMT the ministry was concerned that despite the tax incentives, public EV infrastructure, particularly charging facilities, has not expanded as quickly as expected.
Critics have also pointed to the fact that many companies that benefitted from the generous exemptions had prioritised vehicle sales over investing aggressively in charging infrastructure and ecosystem development.
That has resulted in discussion within the government over whether public funds should continue subsidising imported EVs given their buyers are generally from the higher-income groups, the insider said.
“The policy shift is not about nationality. It is about moving from a market-entry phase to a localisation phase.
“To ease the transition, the government is still allowing companies to clear existing EV stocks and vehicles already in transit under the old incentive structure.”