Malaysia’s automotive sector stands at the threshold of significant transformation—not merely through technological advances, but through sweeping policy and regulatory reforms that are set to reshape industry dynamics, consumer behaviour, and market competitiveness.
From green fuel mandates to new consumer protection laws, these measures signal a broader national agenda: to ensure sustainability, transparency, and long-term resilience within Malaysia’s automotive ecosystem.
1. Expansion of Biodiesel Mandate to B20
As part of Malaysia’s commitment to achieving net-zero carbon emissions by 2050, the government has expanded the biodiesel requirement from B10 to B20 (20% palm-based biodiesel) at strategic transport hubs including KLIA and major ports.
Implications for the industry:
- Reinforces the government’s commitment to renewable energy integration
- Supports the palm oil sector and downstream biofuel industries
- Raises concerns among commercial fleet operators regarding engine compatibility and maintenance requirements, particularly for older diesel-powered vehicles
While environmentally driven, the transition calls for robust stakeholder engagement and updated technical guidelines to ensure smooth nationwide implementation.
2. Introduction of a Lemon Law for Consumer Protection
The long-awaited Lemon Law is expected to be introduced by March 2025, offering legal recourse to consumers who purchase vehicles with persistent, unresolved defects.
Key features (anticipated):
- Mandates refunds, vehicle replacements, or free repairs in cases where manufacturers fail to address recurring faults
- Extends protection to used and reconditioned vehicles, thereby enhancing confidence in the secondary market
- Strengthens accountability across OEMs, dealers, and importers, particularly in after-sales service and product assurance
This legislation marks a pivotal step toward enhancing trust in the automotive market and aligning Malaysia’s consumer protection standards with global benchmarks.
3. Targeted Fuel Subsidy Rationalisation
In mid-2025, the government announced the phased removal of RON95 fuel subsidies for T15 (top 15% income earners), as part of broader fiscal reforms and subsidy rationalisation strategies.
Market impact:
- Encourages higher-income vehicle owners to transition toward more fuel-efficient or electrified alternatives
- Could shift purchasing trends within the mid- to premium-market segments, especially for internal combustion engine (ICE) vehicles
- May indirectly accelerate EV and hybrid adoption as a long-term cost-saving measure
This policy underscores the government’s dual aim of promoting equity in subsidy allocation and supporting the low-carbon mobility agenda.
4. OMV-Based Excise Duty Reform Deferred to 2026
The proposed shift to Open Market Value (OMV)-based excise tax calculation—long a subject of industry concern—has officially been deferred to January 2026.
Why it matters:
- Current CKD (completely knocked-down) models benefit from lower duties; a shift to OMV valuation could result in price increases of 10–30%, particularly in the B- and C-segments
- Manufacturers now have additional lead time to reassess pricing strategies, localisation plans, and supply chain optimisation
- The delay helps maintain market affordability, but the eventual rollout will require strategic adjustments from OEMs and dealers alike
While the deferral provides temporary relief, the structural reform remains inevitable. The industry must begin planning for greater transparency and competitiveness in the longer term.
Moving Forward: Policy as a Strategic Catalyst
Together, these policy updates reflect a more strategic, consumer-centric, and sustainability-driven direction for Malaysia’s automotive industry. Rather than acting as roadblocks, these reforms have the potential to serve as catalysts for innovation, improved industry standards, and enhanced investor confidence
The Malaysian automotive landscape is no longer defined solely by product and technology—it is increasingly shaped by policy, regulation, and responsible governance. For industry players, anticipating and adapting to these shifts is no longer optional. It is a competitive imperative.
