Malaysia's Ministry of Investment, Trade and Industry (MITI) is studying a proposed electric vehicle (EV) levy to help fund the expansion of the country's public charging infrastructure while balancing fiscal sustainability, consumer affordability and investment in the EV sector.

Speaking at the RHB Progress Series 2026 conference, MITI Minister Johari Abdul Ghani said the government had not decided whether the proposed levy would be imposed directly on consumers and was still evaluating the most appropriate implementation mechanism.

"We did not say that we will impose the proposed EV levy on the public. We are still looking at the most appropriate mechanism. However, if those costs are imposed on manufacturers, they will ultimately pass them on to consumers.

"The question is at what level the charges should be set, how much they will amount to, and how much longer the government can continue providing subsidies," he said.

Johari said the government had already introduced incentives to encourage EV adoption while also bearing the cost of developing charging infrastructure.

"All these involve the cost of electricity, gas, coal and other inputs. This needs to be understood. Many people fail to appreciate the broader picture because they only see one side of the issue," he said.

He added that Malaysia must also consider the long-term coexistence of EVs and internal combustion engine (ICE) vehicles.

"Malaysia also remains reliant on gas- and coal-fired electricity generation. As such, the development of the EV ecosystem must take into account the cost of electricity supply and the infrastructure required. The government is also operating under a fiscal deficit. When we are running a deficit, how are we going to fund it? Where will the money come from? One option is to impose a levy on vehicle manufacturers. However, if manufacturers are charged, they will ultimately pass the additional costs on to consumers," he said.

Earlier in Parliament, Johari said the government was considering imposing a levy on every EV sold and directing the proceeds into a dedicated fund to expand public charging infrastructure.

"We may impose a levy on every EV sold and channel the proceeds into a dedicated fund to build public charging stations because we cannot rely solely on vehicle manufacturers or distributors to undertake such investments. I was told that China spent billions to build chargers. But if we want the government to do that here, we don't have the money," he said.

Responding to media queries, Johari described the levy as one of several initiatives under evaluation.

"MITI is unable to share further details at this juncture regarding the public charging infrastructure levy but is committed to developing a trusted EV ecosystem for all," he said.

The proposal follows the government's estimate that it forgone MYR 3.3 billion (US$ 780 million) in tax revenue between 2022 and 2025 through exemptions for fully imported (CBU) EVs.

Johari said the forgone revenue comprised import duties, excise duties and sales tax that were waived during the four-year incentive period.

According to the Malaysian Automotive Association, the incentives contributed to higher EV adoption. However, the government said private investment in charging infrastructure had not kept pace, and revenue generated from duties on imported EVs could be reinvested to expand the national charging network.

Malaysia's tax incentive framework changed after the CBU EV tax holiday expired on December 31st, 2025.

While tax exemptions for imported EVs were not extended, incentives for locally assembled (CKD) EVs remain in place until December 31st, 2027. CKD EVs continue to receive full exemptions from excise duties and sales tax, while import duties on completely knocked down components are also waived until the end of 2027.

Standard taxes now apply to imported CBU EVs, including a 30% import duty, a 10% excise duty and a 10% Sales and Services Tax (SST), applied sequentially. Imports from countries covered by free trade agreements, including China under the ASEAN-China Free Trade Area (ACFTA), may qualify for reduced or zero import duties, although excise duties and SST still apply.

To encourage local production, MITI has also revised the Franchise Approved Permit (AP) scheme. Fully imported EVs must have a minimum cost, insurance and freight (CIF) value of MYR 200,000 and a minimum motor output of 180 kW. After taxes, logistics costs and dealer margins are added, imported EVs are generally priced above MYR 300,000, effectively limiting the CBU market to premium models and encouraging manufacturers to establish CKD operations for higher-volume vehicles.

Battery electric vehicles also benefited from a full road tax exemption until December 31st, 2025. The Ministry of Transport has since introduced a new road tax structure based on motor output rather than engine capacity, with rates intended to remain lower than those for comparable ICE vehicles.

In addition, taxpayers remain eligible to claim up to MYR 2,500 annually in personal income tax relief for EV charging equipment, installation, rental or public charging subscription expenses.

The discussion over the proposed levy coincides with broader questions surrounding Malaysia's attractiveness as an EV manufacturing destination.

Chinese automaker BYD announced plans in August 2025 to establish a MYR 1.3 billion assembly plant in Tanjung Malim, with production originally expected to begin in the second half of 2026. However, the project has reportedly been delayed amid discussions over conditions governing high-volume local assembly projects.

According to earlier reports, new large-scale automotive investments are required to export a substantial proportion of locally assembled production, while MITI has stated that these requirements apply equally to all new high-volume projects. The ministry also clarified that locally assembled vehicles would be subject to a minimum on-the-road price of MYR 100,000, rather than MYR 200,000 as previously reported.

Industry observers have expressed mixed views on the proposed levy.

An independent economist said introducing additional costs during the early stages of EV adoption could reduce demand and weaken the commercial case for further charging infrastructure investment.

She also said stricter conditions for foreign manufacturers could reduce Malaysia's attractiveness as an investment destination.

"Once manufacturers establish plants, suppliers and distribution networks in another country, that investment can be difficult to win back. If Malaysia misses the current investment cycle, local carmakers may struggle to make the transition as demand moves away from petrol and diesel vehicles," she said.

A consultant said introducing a levy at the current stage of market development could slow EV adoption.

"Malaysia is still in the early stages of EV adoption, and increasing the cost of ownership risks slowing demand just when the market needs scale to encourage private investment in charging infrastructure. Investors value policy consistency. If the objective is to attract EV manufacturing and develop a domestic ecosystem, policies that increase uncertainty could weaken the business case for companies such as BYD to expand local production," he said.

Shahrol Azral Ibrahim Halmi, president and co-founder of the Malaysian Electric Vehicle Owners Club, said public acceptance would depend on the size of the levy and how transparently the proceeds were used.

"The main concern from the public is understanding how such funds will be utilised and a clear understanding of how this levy will result in long-term benefits for EV users," he said.

He added that Malaysia's largest charging infrastructure gap remains along highways, where high-powered chargers require significant investment and electricity grid upgrades.

Malaysia continues to review its long-term EV strategy while balancing fiscal sustainability, industrial development and the expansion of nationwide charging infrastructure.