KUALA LUMPUR, July 22 (Xinhua) -- Analysts have foreseen intensified competition for electric vehicles (EVs) in Malaysia amid policy changes in the country.

Research house BIMB said in a note on Monday that Malaysia's EV market is approaching a key policy turning point, with the government expected to end completely built-up (CBU) import tax exemptions and the Approved Permit (AP) regime by year-end.

"This decision will likely shape the direction of the market -- either accelerating liberalization and inviting more aggressive price competition or maintaining a controlled environment that protects local players," said the research house.

BIMB noted that the policy outcome will not only affect the pace of EV adoption and pricing dynamics, but also influence the competitiveness of local original equipment manufacturers (OEMs), ongoing completely knocked down (CKD) investment strategies, and the overall outlook for the automotive sector.

Hong Leong Investment Bank also highlighted in its note on Tuesday that it expects continued stiff competition for the 100,000 ringgit (23,624 U.S. dollars) to 200,000 ringgit price segment in Malaysia due to normalizing of consumer demand and aggressive new launches and sales campaigns.

However, it foresees the EV segment in Malaysia continuing to gain momentum with a 4.6 percent market share in the first half.

It also noted that the new customized incentive mechanism (NCM) is expected to materialize by the fourth quarter of 2025, in place of the current industrial linkage program (ILP).

The NCM is being structured to encourage OEMs to expand localization activities at the local vendor level and thereby increase the ability of local suppliers to produce higher-value components. Further incentives are also being considered for EVs, in order to promote the development of this new technology in the local automotive ecosystem.

Meanwhile, Kenanga Research in a note on Tuesday expects more favorable incentives from the Malaysian government, which has set a national target for EVs and hybrid vehicles of 20 percent of total industry volume (TIV) by 2030 and 38 percent by 2040.

Kenanga opined that Malaysia's new vehicle sales will be supported by new battery EVs (BEVs) that enjoy sales and service tax (SST) exemptions and other EV facilities incentives up until 2025 for CBUs and 2027 for CKDs.

While the exemption of import and excise duties for CBU EVs has partly driven EV adoption, RHB Investment Bank opined that it is unlikely to get extended beyond end-2025, as it thinks the government's focus will now be on attracting OEMs to manufacture and assemble their EVs locally, as CKD EVs will continue to enjoy a tax holiday until end-2027.

According to the research house, an extension of the tax holiday for CBU EVs would be counter-productive for incentivizing OEMs to establish local production facilities.

"While we expect EV numbers to continue picking up in the coming months, growth in market share is likely to remain moderate due to structural headwinds -- high pricing and limited availability of charging infrastructure. As such, EVs are unlikely to influence overall TIV in the near term," it said in its note on Tuesday. ■