Malaysia to spend RM40 billion on fuel subsidies as EV policy backfires
Deputy Finance Minister Liew Chin Tong told Parliament on July 16 that Malaysia will allocate RM40 billion for fuel subsidies this year.
Source: The Edge Malaysia · July 29, 2026 at 6:54 AM · AI-assisted report
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KUALA LUMPUR, 29 JULY 2026 —
Deputy Finance Minister Liew Chin Tong told Parliament on July 16 that Malaysia will allocate RM40 billion for fuel subsidies this year.
Market Impact
The RM40 billion figure, equivalent to RM1,900 per registered voter, is intended “to ensure that the people continue to be protected,” Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim said.
Analysts say Malaysia’s rising fuel subsidy bill and sluggish electric-vehicle adoption are intertwined. Fuel subsidies make internal combustion engine vehicles cheaper to run, weakening the price signal that might otherwise push drivers toward EVs.
When global oil prices rise, EV registrations briefly surge. Registrations climbed from 4,352 units in February to 9,272 in April 2026, according to official data.
The increase remains small by regional standards. Thailand sold 61,899 EVs in the first four months of 2026, compared with Malaysia’s 26,944, even though Thailand’s new-car market is about 25% smaller.
Thailand limits open-ended subsidies. Its oil fund is capped at 150 billion baht (RM18.7 million), so consumers cannot rely on government support for future price shocks.
Bangkok instead uses targeted measures. The 30@30 policy aims for 30% of new vehicles to be zero-emission by 2030. Under EV3 and EV3.5 policies, Thai-made EVs can receive subsidies of up to 100,000 baht per unit (RM12,000).
The government has also allocated 200 billion baht (RM25 billion) from an emergency loan decree to expand charging infrastructure, boost EV parts production and support battery-swapping services.
With less than four years remaining, Thailand appears on track to meet its 30@30 target.
Malaysia’s EV push began in October 2021, when then-finance minister Tengku Datuk Seri Zafrul Abdul Aziz announced 100% import and excise duty exemptions for EVs. Registrations rose ten-fold by 2025.
Affordable locally built models such as the Proton e.Mas 5 and Perodua QV-E entered the market alongside luxury imports including BYD.
On July 9, the Ministry of Investment, Trade and Industry (Miti) reversed course. New rules restrict imported EVs priced below RM300,000 and limit local assembly of lower-cost imports to “preserve marketspace for national players like Proton and Perodua.”
The move risks higher prices and reduced choice for consumers. Geely’s Geome Xingyuan EX2 sells for 61,800 yuan in China (RM37,200), nearly 40% less than the Proton e.Mas 5 in Malaysia.
Industry figures warn the policy could repeat past mistakes. In 2010, Malaysia introduced 100% duty exemptions for hybrid electric vehicles. Hybrid sales reached 6,007 units in the first half of 2014, then fell to 3,333 units in the first half of 2015 when incentives ended.
Miti’s protectionist stance has spanned four decades. Critics argue it may keep Malaysia behind Thailand and miss the government’s own target of 15% EV sales by 2030.
Persistent sales of internal combustion engine vehicles could prolong decades of potential fuel subsidies if Malaysia can afford them.
Thailand’s RM25 billion investment in energy transition contrasts with Malaysia’s RM40 billion fuel subsidy programme. While protecting affordability and domestic industry matters, the cost is high—and may rise further as Malaysia delays its own shift away from fossil fuels.