Malaysia fuel subsidy removal 2026 marks a major policy shift. For years, blanket fuel subsidies benefited all income groups. Yet the top 20% income group, known as T20, consumed 35% of the RM50.8 billion spent on fuel subsidies. That equals about RM17–17.8 billion each year.
For every RM1 in fuel subsidies, 53 sen went to the T20. In comparison, only 15 sen benefited the B40 bottom 40%. This gap shows clear inequality. Now, the government plans to correct this imbalance. Starting mid-2025, RON95 rationalization will target eligibility using the PADU database. By 2026, the impact of these reforms will be fully visible.
The goal is simple. Redirect savings toward lower-income households. At the same time, allow higher-income groups to pay market rates. Even at market prices, RON95 in Malaysia remains cheaper than Singapore’s RM8.51 per litre. For the wealthy, affordability is not the main concern.
Revised RON95 adjustments are projected to save RM2.5–4 billion yearly at $75 per barrel oil prices. If T20 exclusion is applied more strictly, savings could reach RM15–17 billion annually. This fiscal space can support more targeted aid programs.
Luxury Car Sales and the EV Acceleration
The Malaysia fuel subsidy removal 2026 is expected to influence luxury car sales. Total vehicle sales reached a record 820,752 units in 2025, up 0.5% year-on-year. Passenger cars grew 13% to 228,572 units, supported by strong SUV demand.
However, forecasts point to contraction in 2026. Fitch revised its 2025 sales forecast to a -5.8% contraction due to RON95 restructuring and tighter lending conditions. Higher fuel costs may create a short-term wait-and-see attitude among buyers of high-end vehicles.
Diesel subsidy cuts previously had minimal long-term impact on overall car sales, according to the Malaysian Automotive Association. Commercial vehicle sales stabilized after an initial backlog adjustment. RON95 rationalization may follow a similar pattern. The effect could be temporary rather than structural.
Still, luxury car buyers may rethink long-term ownership costs. Without subsidies, fuel expenses for large internal combustion engine (ICE) vehicles become more visible. For high-income households, this may not reduce purchasing power. But it may shift preferences.
This is where electric vehicles (EVs) gain momentum.
EV sales surged 109% year-on-year to 30,848 units in 2025. Electrified vehicles, including EVs and hybrids, reached 69,363 units, up 52% year-on-year. By early 2026, EV market share rose to 9.18%.
T20 and upper M40 households are leading adopters. These are households earning above RM10,971 per month. Models such as the Nissan Leaf, priced above RM180,000, fall comfortably within this group’s budget. Tax rebates also play a strong role. Around 65% of respondents cited tax incentives as a key motivation for choosing EVs.
As subsidies are rationalized, the total cost of owning a fuel-powered luxury car increases over time. Electricity becomes a more stable cost base compared to unsubsidized petrol. For wealthy consumers, the shift is not about affordability alone. It is about efficiency, image, and future readiness.
PADU acts as the gatekeeper of this transition. By early 2024, PADU registrations exceeded 30 million, including 21.9 million adults. Later updates surpassed 7.36 million, covering about 35% of over 20 million adults. This centralized database ensures that only eligible groups receive subsidies.
For businesses, PADU compliance becomes a trust marker. It improves data accuracy and helps brands understand spending patterns. In the automotive sector, this allows more precise targeting of high-income EV buyers.
The Malaysia fuel subsidy removal 2026 is not only a fiscal reform. It reshapes consumer behavior at the top end of the market. T20 claimed RM17 billion in subsidies in recent years. Now, those funds may indirectly fuel EV innovation and adoption instead.
Luxury car sales may slow in the short term. But the structural trend is clear. Among the wealthy, electric vehicles are no longer niche. They are becoming the logical next step in a post-subsidy era.
Read more: Malaysia’s Green Hydrogen Push: Powering the Next Energy Era
