A portion of M40 car owners may be cut off from fuel subsidies come Jan 2024

A portion of M40 vehicle owners may be cut off from targeted fuel subsidies likely to be introduced 1-Jan 2024.

Kenanga Research states, “We believe part of the M40 group may also be cut off, resulting in reduced spending power of this group of consumers. We therefore turn cautious on mid-market retailers.”

The Government will unveil the targeted fuel subsidies during the tabling of Budget 2024 in the Parliament on 13 Oct 2023 to replace the existing blanket fuel subsidy; where it’s estimated that up to 35 percent of the RM 77.3b subsidy in 2022 was utilized for fuel subsidies that benefitted the wealthier T20 group.

It is understood that the Government will leverage the new PADU database (to be launched in Jan 2024) that integrates data from various government agencies including LHDN and JPJ to determine a recipient's “net disposable income” criterion, which will largely discount the T20 demographic.

Also read: Government looking to implement targeted fuel subsidy for diesel and RON95 in 2024

The 2024 targeted fuel subsidy system was first announced in May of this year, though an exacting mechanism to gauge targeted subsidies wasn't in place, at the time. 

Also read: Public Investment Bank: Brace, fuel prices to increase after subsidy review in H2 2023

The B40 group of consumers will continue to enjoy fuel subsidies, and hence experience no reduction in spending power.

The current fuel price cap system was first introduced in 2019, with a price cap of RM 2.08 (RON 95) and RM 2.18 (diesel), this was subsequently reduced in Feb 2021, to the current rates of RM 2.05 for RON 95 petrol and RM 2.15 for Euro 5 B10 diesel.