Budget 2026 has set a bold new direction for the automotive industry.
The automotive industry is entering a new era in 2026, with major policy changes unveiled in Belanjawan 2026 Malaysia. These updates aim to tighten loopholes, encourage cleaner vehicles, and reshape the way new cars are bought and sold in Malaysia.
Tax Cap for Langkawi and Labuan
For years, Langkawi and Labuan have offered generous tax exemptions on vehicle purchases — a favourite route for buyers of high-end models. Starting 1 January 2026, the government will cap tax exemptions at RM300,000 per vehicle value.
This means luxury car buyers will no longer enjoy unlimited exemptions. Cars above this threshold will face normal tax rates, potentially increasing the cost of importing high-value models. This move is expected to close revenue leakages and create a more level playing field for local dealers.
EV Incentives and Green Push
The budget also places a strong emphasis on electrification. Investments in renewable energy infrastructure and EV charging partnerships — including highway charging with PLUS Malaysia Berhad — aim to make electric mobility more accessible nationwide.
Additionally, the Green Technology Financing Scheme (GTFS 5.0) will run until the end of 2026, offering favourable financing options for automotive players investing in EV technology. This could accelerate the introduction of more EV models and infrastructure.
Continued Tax Exemptions for Taxis
The government is maintaining 100% excise duty and sales tax exemptions on new national cars from Proton and Perodua for taxi and private hire car owners. This supports the public transport sector and keeps operating costs manageable.
The Big Picture
The combination of a luxury tax cap and EV incentives signals a clear direction: a more regulated, cleaner, and competitive new car market. Buyers of premium cars may face higher costs, but mainstream buyers could benefit from better EV offerings and incentives.
For automakers, this is a cue to adapt — whether through electrification strategies, pricing adjustments, or new market positioning.
