Malaysia to offer higher tax incentives for automotive local content

Malaysia is introducing a new National Automotive Policy (NCM) designed to reward companies that increase local content, research and development (R&D), and talent development. Deputy Minister of Investment, Trade and Industry Sim Tze Tzin stated that higher levels of local content will lead to greater tax exemptions and potential reductions in excise duties. This new mechanism will cover both electric vehicles (EV) and internal combustion engine (ICE) vehicles, aiming to strengthen industry localization as current EV tax incentives approach their end of year.

The automotive sector remains a vital economic pillar for Malaysia, contributing approximately RM82 billion, or 5 percent, to the national GDP. The industry supports over 730 supply chain companies and employs more than 700,000 people. To align with the New Industrial Master Plan 2030 (NIMP2030), the government aims to transition the sector from traditional vehicle assembly to a high-value regional hub focused on innovation and advanced manufacturing.

Market performance remains strong, with Total Industry Volume (TIV) for 2025 reaching a record 820,752 units. In the first half of 2026, vehicle sales increased by 3.1 percent year-on-year to 385,353 units. Consequently, the Malaysia Automotive Association (MAA) has revised its annual TIV forecast upward to 800,000 units.