2025 will go down as a memorable year for Malaysian car owners and consumers alike as the year of the removal of blanket subsidies for RON95 petrol, marking a big hit to our wallets at the pump as well as potentially increasing our cost of living due to the trickle-up effects of increased energy and transport costs. However, a new report by MIDF Research suggests it will also lead to increased EV adoption.
Specifically, these findings point to the proposed T15 income bracket criteria for the RON95 fuel subsidy, which is set to be finalised by the middle of this year. As reported by Bernama, the policy shift may push buyers toward more affordable and fuel efficient internal combustion engine vehicles or even electric vehicles (EVs), especially before the current tax exemptions on fully imported (CBU) EVs expire at the end of this year.
At the same time, the auto sector faces a revised excise duty structure that will take effect in January 2026. This tax adjustment will impact completely knocked down (CKD) components, potentially increasing CKD vehicle prices by 10% to 30%, MIDF Research noted, which sounds like more bad news for the consumer seeking an accessible and affordable car purchase.
Meanwhile, private sector economists have proposed an alternative two-tier pricing system for RON95 petrol instead of direct the cash assistance that the government has already implemented for unsubsidised diesel. Some argue that basing fuel prices on vehicle type would not prevent wealthier individuals from accessing subsidised fuel by driving more affordable cars.
Months ago, when announcing the plan during the tabling of Budget 2025, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim stated that Malaysia’s top 15% (T15) of earners would soon pay more for RON95 petrol.
However, up until this point, there has been no clear definition of the T15 income group, leading to widespread speculation and unease among the rakyat with many estimates suggesting that even a household earning RM12,000 to RM13,000 per month would fall into this category—equivalent to RM6,000 per person in a dual-income household.
Following public concern, Anwar has since softened his stance on the T15 classification, leaving the final details of the subsidy reform still uncertain. Having said that, the likelihood that households that have so far shunned the prospect of EV ownership suddenly welcoming it also seems a little far fetched.
More plausible, given the financial uncertainty, is for Malaysians to consider used vehicles and/or downsizing to a smaller and more fuel efficient models instead of ‘splurging’ on a new EV or hybrid in the hopes of recouping the costs over the long term, especially given the obvious and proven weak value retention these kinds of vehicles exhibit.