KUALA LUMPUR, Dec 18 — Malaysia’s automotive industry underwent a formidable transition this year, advancing as an integrated, electric vehicle (EV)-ready, supply-chain-driven automotive hub from being largely an assembler and consumer-market.

This sets the stage for Malaysia to play a bigger role in regional automotive markets potentially as an export base and not confined to the comparatively limited domestic market.

It clearly signals a marked progress in the auto sector after more than 40 years since the Proton Saga was rolled out in 1985 which marked Malaysia’s entry into automotive manufacturing.

This has been made possible thanks largely to the continued push for localisation, coupled with EV manufacturing and supportive policy frameworks by the government.

The birth of Malaysia’s first homegrown EV, Perodua QV-E, marked a turning point for the local automotive landscape because it shifts the country from EV adoption to EV creation, which was followed recently by the launch of the competitively-priced Proton e.MAS 5.

In the process, it transforms the industry to becoming a more competitive market with affordable offers, among other things.

Overall, the industry grew at a meaningful trajectory supported by several key factors namely aggressive sales promotions, new model launches and the potential for front-loaded demand before future excise duty changes in 2026.

Softer sales

Based on the Malaysian Automotive Association’s (MAA) data, the total industry volume (TIV) for the first half of the year (1H 2025) reached 373,636 units, a 4.6 per cent or 17,815 units lower when compared with the 391,451 units in the same period last year.

The association noted that the decline was largely expected, given the high base effect following 2024’s record-breaking TIV of 816,747 units.

Despite this performance, MAA maintained its full-year TIV forecast of 780,000 units for 2025, which represents a 4.5 per cent year-on-year (y-o-y) drop.

The diesel subsidy rationalisation that started in June 2024 saw demand for commercial vehicles decrease by a significant 21 per cent compared with the first six months of 2024.

Sales of commercial vehicles totalled at 26,552 units in 1H 2025 against 33,595 units registered in 1H 2024.

In its latest data, MAA announced TIV surged 30 per cent to 75,992 units in October 2025 from 58,490 units in September — comprising 70,321 passenger vehicles and 5,671 commercial vehicles.

The higher TIV was mainly driven by the rush to purchase completely built-up (CBU) battery electric vehicles (BEVs) following the Budget 2026 announcement of the expiry of tax exemption for CBU BEVs by the end of this year coupled with aggressive year-end promotional campaigns by automotive companies.

However, the YTD TIV was 2.0 per cent lower at 655,328 units compared with 667,568 units in the same period of 2024.

As for production, a total of 617,355 units were produced in the first 10 months of 2025 – comprising 582,435 passenger vehicles and 34,920 commercial vehicles — against 664,923 units in the same period a year earlier.

Nevertheless, improved clarity on the new petrol subsidy mechanism, which allocates fuel quotas of 300 litres per month to Malaysian citizens with valid driving licences, is expected to support new vehicle sales in the last quarter of this year.

Among prominent launches this year were Proton e.MAS 5, iCAUR V23, MG S5 EV, Zeekr 7X, Smart #5, Chery Tiggo Cross, Jetour T2, Jaecoo J6/J8, and refreshed versions of the Proton Saga, Proton X50 and Honda Civic.

Best selling cars so far this year include the Perodua Bezza, Axia and Myvi, while Proton and Toyota also recording significant registrations with Proton X50 also performing well.

Electrification push

This year was also a pivotal year for the Malaysian electric vehicle (EV) market transitioning into the mainstream segment, setting the stage for increased local assembly and a changing market landscape next year.

From January to October 2025, a total of 31,273 EVs were registered, already surpassing the entire total for 2024 of 21,789 units. EVs currently accounted for 5.34 per cent of TIV while petrol hybrids were at 3.44 per cent.

In October alone, EVs grew by a substantial 176.9 per cent y-o-y to 4,345 units from 1,569 units in the same month of 2024.

Proton e.MAS 7 was the top-selling model (742 units) while Chinese brands particularly BYD dominated the market with a wide range of models.

Tesla was also a major player, while new contenders like Zeekr and Xpeng climbed the charts.

On December 1, Perodua launched Malaysia’s first fully homegrown battery electric vehicle (BEV) named QV-E, priced around RM80,000 (excluding insurance and battery) with mandatory monthly battery leasing (BaaS) for affordability.

This milestone also proves Malaysia’s capability in designing, engineering and producing its own EVs, thus reducing reliance on foreign models and building local EV tech expertise.

Among other landmark events was the official opening of Proton’s first dedicated EV manufacturing facility within the Automotive High Tech Valley (AHTV) in Tanjong Malim.

The relocation from Shah Alam after four decades of operation was viewed as a strategic move for the national car maker to rationalise, reduce costs, improve quality and transition to new technology after investing RM253 million in new stamping lines in Tanjong Malim.

Tax, duty, policy shifts

Since the government decided to end tax incentives on fully imported completely built-up (CBU) EVs on December 31, 2025, many analysts opined that the registration of EVs would increase further as the deadline approaches.

Tax incentives for locally assembled/completely knocked down (CKD) vehicles, however, will still continue until the end of 2027.

This would continue to encourage the industry to move more towards local assembly and component localisation, which might benefit domestic automakers and vendors.

The top brands that have committed to CKD production include Proton and BYD. More brands including Zeekr, iCaur and XPeng are expected to begin CKD production soon.

The petrol subsidy rationalisation or BUDI95 programme rollout, where RON95 price has been reduced to RM1.99 per litre from RM2.05 per litre, effective Sept 30, could make the EV transition even slower-than-expected.

Malaysia aims for EVs to represent 20 per cent of new vehicle sales by 2030, with longer-term vision extending it to 80 per cent by 2050 including hybrid vehicles.

By lowering the effective cost of driving (fuel) for many Malaysians, BUDI95 reduces one of the recurring costs associated with owning a car.

Therefore, the middle- and lower-income group has less incentive to switch from internal combustion engine (ICE) to EV for the time being.

Moreover, the high pricing and limited availability of charging infrastructure was noted as a challenge.

The government maintained a target of installing 10,000 charging points by end-2025 with contributions from various charge point operators and investments from companies such as Gentari and Tesla.

As of September 30, a total of 5,149 public EV charging points were deployed nationwide — consisting of 1,709 direct current (DC) charge points and 3,440 alternating current (AC) charge points. — Bernama