KUALA LUMPUR, Dec. 17 (Xinhua) -- While Malaysia's electric vehicle (EV) sector is gaining momentum, analysts warn that a "crowded" marketplace is beginning to erode profit margins.

TA Securities said in a report on Wednesday that Malaysia's EV landscape would remain crowded and highly competitive, with an influx of new entrants, exerting further pressure on both pricing and margins.

It noted the expiry of the EV completely built-up (CBU) tax exemption is also expected to weigh on demand.

"Overall, we anticipate the operating environment for the automotive industry to stay challenging in 2026, with profit margins likely to come under even greater strain," said the research house.

Meanwhile, MBSB Research said in its recent report that EV momentum in Malaysia is building with an expanding local assembly pipeline.

According to the research house, EV adoption in Malaysia remains robust, with EV sales by Malaysian Automotive Association (MAA) members jumping to 20,167 units (surged 102.6 percent year-on-year) in the first nine months of 2025, driven by a wider model rollout and accelerated purchases ahead of the year-end expiry of CBU EV tax incentives.

Hybrid vehicle sales have also expanded robustly in the same period, reaching 27,616 units, up 20.5 percent year-on-year.

MBSB highlighted that a series of recent completely knocked-down (CKD) EV investment commitments align well with the CKD EV tax incentives in place until end-2027, pointing to tangible rollouts beginning in 2026.

"With Proton having begun assembly of e.MAS 7 and set to start e.MAS 5 production in the first quarter of 2026, together with Perodua's newly launched QV-E, competition within the developing EV segment is expected to intensify," said MBSB.

It also noted that Malaysia is targeting xEVs, covering both EVs and hybrids, to reach 20 percent of annual total industry volume by 2030, compared with 7 percent as of the first nine months of 2025.

Supporting this agenda will require continued investment in strengthening EV infrastructure, said MBSB.

Nomura also said that Malaysia's EV transition is expected to be gradual, with EVs targeted to reach 15 percent of new vehicle sales by 2030, according to the government.

"However, EV demand is not expected to peak in the next five years due to infrastructure challenges, and we believe the new petrol subsidy mechanism could slow the shift from internal combustion engines, particularly among middle- and lower-income consumers," said the research house.

While over 5,000 charging stations have been built versus the 10,000-charger target by end-2025, it noted that high installation costs and lengthy approval processes remain key obstacles to fast EV adoption. ■