2025 will mark a major shift for Malaysian car owners with the removal of blanket subsidies for RON95 petrol, leading to higher fuel prices and increased living costs due to rising transportation and energy expenses. However, a report by MIDF Research suggests that this policy change could accelerate electric vehicle (EV) adoption as consumers seek cost-effective and sustainable alternatives. With growing government incentives and expanding charging infrastructure, more Malaysians may transition to EVs to offset fuel costs, potentially reshaping the nation’s automotive landscape and driving a long-term shift towards cleaner mobility solutions.
The findings highlight the impact of the proposed T15 income bracket criteria for the RON95 fuel subsidy, which is expected to be finalized by mid-2025. According to Bernama, this policy shift could push consumers towards more fuel-efficient internal combustion engine (ICE) vehicles or even electric vehicles (EVs), particularly before the current tax exemptions on fully imported (CBU) EVs expire at the end of the year. This suggests that potential car buyers may rush to secure EV purchases while incentives are still in place, potentially accelerating EV adoption in Malaysia.
The Malaysian automotive sector is bracing for significant changes, with a revised excise duty structure set to take effect in January 2026. According to MIDF Research, this adjustment will impact completely knocked down (CKD) components, potentially driving up CKD vehicle prices by 10% to 30%, making car ownership more expensive for consumers.
Meanwhile, discussions on RON95 fuel subsidy reforms continue, with private sector economists proposing a two-tier pricing system as an alternative to direct cash assistance, similar to the model used for unsubsidized diesel. However, some critics argue that linking fuel prices to vehicle type may not effectively prevent wealthier individuals from accessing subsidized fuel by simply opting for lower-cost vehicles. This ongoing debate highlights the complexities of subsidy restructuring and its broader impact on affordability in Malaysia’s auto market.
In October 2024, during the Budget 2025 announcement, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim revealed that Malaysia’s top 15% (T15) earners would soon have to pay more for RON95 petrol as part of the country’s subsidy rationalization plan.
However, as of now, there is still no clear definition of the T15 income group, leading to speculation and public concern. Many estimates suggest that households earning between RM12,000 to RM13,000 per month could be classified under this category—equating to approximately RM6,000 per person in a dual-income household. The lack of clarity has sparked unease among the rakyat, as many middle-class families fear they may be affected by the subsidy removal despite not feeling financially well-off. The final criteria for the T15 income bracket are expected to be announced by mid-2025.
Following public concerns, Prime Minister Anwar Ibrahim has softened his stance on the T15 classification, leaving the final details of the RON95 subsidy reform uncertain. While there have been discussions about the policy encouraging electric vehicle (EV) adoption, the idea that households previously uninterested in EVs would suddenly embrace them seems unlikely.
Source: data.gov.my
A more realistic scenario amid financial uncertainty is that Malaysians may turn to used cars or downsize to smaller, fuel-efficient internal combustion engine (ICE) models instead of investing in new EVs or hybrids. The high upfront costs of EVs, combined with concerns over weak resale values and limited charging infrastructure, make them less attractive for cost-conscious buyers. Unless stronger incentives are introduced or battery technology improves significantly, many consumers may prioritize affordability over long-term fuel savings.
