In 2023, Malaysia’s Prime Minister, Anwar Ibrahim, set an ambitious target to transition 15% of vehicles on Malaysian roads to electric vehicles (EVs) by 2030, attracting a range of international brands into the country. For Chinese companies, this presents an opportunity. But how should they approach entering the Malaysian automotive market, the third-largest manufacturing hub in Southeast Asia?
On September 1, 2023, Malaysia's Ministry of Investment, Trade, and Industry (MITI) released the New Industrial Master Plan 2030 (NIMP 2030), aiming to transform its industry and become a globally developed economy by 2030. EVs are considered a key means of boosting industrial growth and achieving sustainability goals. This policy seeks to decarbonize the economy by developing the EV supply chain and promoting the shift from internal combustion engine vehicles (ICEs) to EVs in the Malaysian automotive industry. This is not only a response to global climate change but also an effort to enhance Malaysia's competitiveness in Southeast Asia.
Additionally, Prime Minister Anwar Ibrahim's ambitious goal of transitioning 15% of the country's vehicles to EVs by 2030 is part of a broader strategy to attract brands, including Tesla, to establish production facilities in Malaysia.
Currently, Malaysia is Southeast Asia’s third-largest automotive manufacturer, with the automotive sector contributing 4% to the GDP. In the past year, total car sales in Malaysia surged by nearly 11%. However, according to the Malaysian Automotive Association (MAA), EVs accounted for only 10,159 units, or about 1% of the 800,000 new cars registered last year. Thus, EVs have significant growth potential in Malaysia. EqualOcean believes Chinese EV companies can view Malaysia as an important potential market.
Policy Outlook for EV in Malaysia
As early as 2014, Malaysia introduced the National Automotive Policy (NAP) to promote energy-efficient vehicles (EEVs), including ICEs, hybrids, EVs, and fuel cell vehicles. However, due to the broad definition of EEVs, many traditional ICE manufacturers opted to upgrade existing models to meet EEV standards rather than investing in new EV production lines, leading to slower progress in EV production and limited attraction of new investments.
Furthermore, consumer demand for EVs has been constrained by concerns over the driving range of battery electric vehicles (BEVs), coupled with an underdeveloped charging infrastructure. To address these challenges, Malaysia’s budgets for 2022 and 2023 introduced specific incentives to stimulate demand for EVs and develop charging infrastructure. Companies involved in building EV infrastructure in Malaysia will benefit from government incentives such as tax breaks. Additionally, the government plans to install 10,000 charging stations by 2025 as part of its Low Carbon Mobility Blueprint.
To accelerate EV production, NIMP 2030 aims to push local EV assembly and manufacturing through Mission-Based Projects (MBPs). One of NIMP 2030’s four key missions is “Push for Net Zero”, with EV production being central to achieving this mission. The government hopes that building local EV manufacturing capacity will become a driver of economic growth, promoting related industries such as electronics, chemicals, and battery manufacturing. For example, Perodua, one of Malaysia’s largest car manufacturers, has committed to launching EVs in partnership with its Japanese partners, focusing on producing affordable EVs for the local market.
Source: Ministry of Investment, Trade and Industry (MITI)
Moreover, in the 2022 and 2023 fiscal budgets, the government increased incentives for EV production and charging infrastructure development, including exemptions on import duties and excise taxes, purchasing subsidies, and plans to establish more charging stations. These policies will help lower the cost of EV production and spur demand growth.
Since 2021, EV sales in Malaysia have significantly increased, with the market expected to reach 17,660 units by 2029. According to Statista, the EV market is expected to generate $1.042 billion in revenue by 2024, with an annual growth rate of between 4-6%.
Challenges Facing Chinese EV Companies in Malaysia
Despite the growth potential for EV production, several challenges persist, including price barriers, infrastructure, local policy protections, consumer awareness, and regional competition. As demand for EVs in Malaysia grows, Chinese brands like BYD and Ora are rapidly entering the market. Currently, BYD is Malaysia’s best-selling EV brand. According to MAA, with the help of its signature models—Dolphin, Atto 3, and Seal—BYD sold 3,728 EVs in 2023, narrowly surpassing German luxury brand BMW (3,600 units) to become Malaysia's top EV seller.
The first challenge for Chinese EV companies in Malaysia is price. Although Chinese EVs enter the market at relatively lower prices, EVs remain expensive overall. Malaysian consumers generally perceive EVs as too costly. Smart Malaysia’s Senior Engineer David Tiah said, “For consumers, the key is affordable electric vehicles. Many people say they would buy an EV if its price falls between RM70,000 (about $16,849) and RM80,000 (about $19,256). Anything over RM100,000 (about $24,070) is too expensive for them.”
Currently, models like the BYD Seal are priced above RM150,000 (about $36,105), and more affordable options like the Ora Good Cat and Neta V are around RM100,000 (about $24,070). For low-to-middle-income groups, this is still a substantial expense. According to South China Morning Post, Malaysia’s primary EV buyers are still high-income groups, while the middle class remains highly price-sensitive, limiting widespread EV adoption. Even with government tax exemptions—allowing EVs imported before 2025 to be exempt from import and excise duties—entry-level EVs have not yet fallen below RM100,000. Therefore, although Chinese brands are competitive in terms of design and technology, price remains a major bottleneck to expanding the market.
The second challenge is Malaysia’s fuel subsidy policy, which makes consumers less inclined to switch to EVs. Malaysia currently heavily subsidizes petrol and diesel, particularly RON95 petrol, widely used by lower-income groups. While the government plans to gradually reduce these subsidies and shift toward more targeted subsidies in the future, widespread fossil fuel use will continue to hinder EV adoption in the short term.
Additionally, many Malaysian consumers lack a deep understanding of the benefits of EVs. According to a South China Morning Post survey, more than 65% of Malaysian consumers cited tax incentives as the main factor driving their EV purchases. Charging infrastructure availability is another key factor. Many consumers have concerns about EV driving range and maintenance costs, with charging inconvenience and high maintenance costs being perceived as major barriers to switching to EVs.
The third challenge is lagging infrastructure development. According to the Malaysian government’s plan, 10,000 charging stations will be built nationwide by 2025, but the current number and distribution of charging stations remain insufficient to meet demand, especially in rural and second-tier cities. The lack of charging stations affects consumer experience and suppresses sales growth. For example, although EV registration has increased in Malaysia, EVs accounted for only about 1.2% of total vehicle registrations as of April 2024. Chinese EV companies like BYD are already actively involved in building EV charging infrastructure in Malaysia.
The final challenge is fierce competition. Chinese EV companies will face stiff competition from local Malaysian brands. For a long time, Malaysia has protected its local automotive industry. In 2023, the Malaysian automotive market was dominated by two local brands—Perodua and Proton—which together accounted for approximately 66.9% of market share. While Malaysia is Southeast Asia's third-largest automotive market after Indonesia and Thailand, most vehicles manufactured and assembled in Malaysia are for domestic consumption. This means international brands must face tough competition. For example, Perodua plans to launch its first locally made EV in 2027, giving it an advantage in price and policy support. In contrast, imported EVs like BYD and Tesla, though technologically advanced, may struggle to compete on price.
EqualOcean’s Recommendations
To address Malaysia’s potential EV market, EqualOcean proposes four strategic recommendations to help Chinese EV companies thrive in this high-potential market:
1.0 Establish Local Partnerships
Chinese EV companies can partner with local firms to jointly promote sales and production. For example, BYD partnered with Sime Darby Motors, the automotive distribution arm of Sime Darby Bhd, which has an extensive market network across the Asia-Pacific region. Sime Darby Bhd plans to invest RM500 million ($107.53 million) in establishing BYD showrooms in Malaysia. By the end of 2024, Sime Darby Motors plans to have BYD showrooms in every state of Malaysia, with 15 to 20 showrooms expected by the end of 2023. Such partnerships allow BYD to expand its sales network rapidly while leveraging local partner channels and resources to reduce entry costs and risks.
Similarly, in 2024, Xpeng (小鹏) partnered with Malaysia’s well-known automotive dealer Bermaz Auto Bhd, which now handles Xpeng’s sales, parts supply, and after-sales services. This allows Xpeng to quickly tap into Malaysia’s market using Bermaz’s existing distribution network.
2.0 Precise Market Positioning and Pricing
Most EVs in Malaysia are still in the high-end market, targeting a small group of consumers. Chinese brands can offer a diverse product line, from budget to premium models, to cater to different consumer groups. For instance, BYD’s Dolphin was launched in 2023 at an entry price of around RM99,000 (about $23,810). Moreover, Perodua plans to launch a model priced below RM100,000, which its CEO, Zainal Abidin Ahmad, believes will lower prices across the market and attract more buyers.
3.0 Brand Marketing and Promotion
According to Smart Malaysia’s David Tiah, most Malaysian consumers still do not fully understand EVs, making them less motivated to buy. Therefore, Chinese EV companies should focus on shaping their brand image in Malaysia through advertising, social media, exhibitions, and test-driving events. For instance, BYD actively participates in local EV exhibitions and related events to showcase its latest EV technologies and products, attracting consumer attention and enhancing its brand image.
4.0 Leverage Regional Competition and Integration Trends
Although ASEAN does not have a unified market like the EU, the region’s economies are highly integrated. Chinese companies should take advantage of regional competition and select optimal investment areas and strategies. Malaysia is a crucial hub in the Southeast Asian market, and Chinese EV companies can expand into other Southeast Asian countries by establishing production and sales bases in Malaysia. For example, in addition to expanding in Malaysia, BYD plans to set up production facilities in Indonesia and Thailand, capitalizing on the potential of these markets to achieve regional integration.
Currently, many ASEAN countries have introduced different policies to attract EV companies. For instance, in 2021, Singapore introduced a series of rebates, offering buyers up to S$40,000 ($29,900) in registration fee and tax discounts for certain EVs until 2024. Thailand offers a THB100,000 ($3,042) subsidy for new EV purchases, and the plan will continue until 2027. This regional competition presents an opportunity for Chinese companies to benefit from various policy incentives to expand their EV presence in Southeast Asia.