Malaysia’s automotive industry in now in a state of flux after it was reported the ministry of investment, trade and industry (MITI) imposed new requirements for BYD’s CKD local assembly plans, which the Chinese conglomerate did not agree to. According to The Edge, the government set a RM200,000 floor price as well as a target of 80% of its production volume to be made up of exports.
As you might expect, this has caused progress on the Tanjong Malim plant, due to be operational in the second half of the year, to ground to a halt, as the two sides are at loggerheads on this issue. At the centre of the dispute are, of course, Proton and Perodua, the protection of which minister Johari Abdul Ghani implied was the reason behind these new requirements.
With many other brands also set to kick off CKD production this year, the news has the potential to scupper plans from the likes of MG, Xpeng and Zeekr. So, what does this all mean for the wider Malaysian automotive industry? Let’s take a closer look.
RM200,000 floor price does not make any sense
Even taken purely at face value, MITI’s purported RM200,000 floor price for CKD EVs is nonsensical at best. Look at BYD’s current lineup – all CBU, let’s not forget – and you’ll realise that every single BYD model is priced below that mark; even the most expensive Sealion 7 Performance AWD slides under it with RM200 to spare. Only the company’s premium Denza marque has cars that cost more than that.
A minimum price of RM200,000 simply does not make any sense for BYD or the myriad of other popular Chinese brands, which thrive on their value-driven positioning versus the usual German and Japanese makes. It also removes any benefit from CKD local assembly.
Sure, MITI could argue that the floor price for CKD models is significantly below that of CBU EVs, which is now RM250,000. But in this rarified (for us, anyway) segment, a difference of RM50,000 isn’t all that much – and if you’re BYD, why would you invest millions, if not billions of ringgit on an assembly plant for such a paltry saving, particularly when the import and excise duties for Chinese CBU EVs aren’t that high anyway?
It only gets worse when you consider that other brands like Tesla and Chery seem to get preferential treatment. Not only has Tesla been able to continue selling cars at 2025 prices, but it has even managed to introduce a new version of the Model 3, the Standard, at under RM150,000. This, I’d contend, would be an even bigger threat to Proton’s eMas range of EVs than BYD, but I digress.
You could put Tesla’s advantage down to MITI’s Global Leaders initiative, which seems to afford the Texas-based company some special privileges that even Proton and Perodua aren’t privy to. But Chery is a different story – Johari himself said that since the company already concluded its deal for its own RM2.2 billion CKD assembly plant in Hulu Selangor, “it stands.” What this means in terms of EV pricing is anyone’s guess.
It appears that the shifting sands of government regulation have caught BYD out on this occasion. Which brings us to our next point…
MITI can’t seem to stop moving the goalposts
When it comes to automotive industry regulation, MITI (and by extension, the government) seems to be playing whack-a-mole, implementing new rules as it sees fit. For some, that may seem like a good thing – a regulator being agile, responding to market forces and movements in the industry without being burdened by bureaucracy or mired in stakeholder negotiations.
But as car companies and the Malaysian Automotive Association (MAA) have mentioned time and time again, the last thing the auto industry needs is unpredictable regulations. The only thing this constant moving of goalposts achieves is spooking firms from committing to long-term investments, especially when other countries are far less fickle with their own policies and incentives.
Look at what has happened to EV incentives in Malaysia – a series of piecemeal extensions for CBU tax breaks, then a hard stop on December 31, 2025, despite pleas for another extension. Throughout all of this, it was implied the government would remove the RM100,000 floor price for CBU EVs this year, with the reinstatement of import and excise duties expected to be the only balancing mechanism.
Then, without warning, MITI announced on December 31 that it would set a RM250,000 floor price for CBU EVs starting this year. Initially only applying to new brands entering the market, this was then expanded to all brands just a few weeks later. But no matter, we wouldn’t have to deal with all this nonsense with tax-free CKD locally-assembled EVs…right?
Well, look where we are now. It’s all a mess, and doubtless other brands will be scratching their heads wondering whether their own CKD plans will be affected by these new requirements. The imbalance of the said requirements, with BYD getting the short end of the stick compared to Tesla and Chery, also suggests that other companies will now have to negotiate for their own terms with MITI.
Will the RM200,000 floor price also apply to brands like Xpeng, or does this only apply to BYD (if so, we would love to know why)? And will Zeekr which, like Proton, Geely owns a stake in – and is set to utilise Proton’s own Tanjong Malim plant – get special treatment?
And what about companies that have already begun their CKD operations? Companies like Leapmotor and MG, the latter of which has only just opened the order books for the locally-assembled S5 SUV, complete with estimated pricing (obviously well below RM200,000). What about Wuling, which has already started deliveries of the TQ Wuling Bingo?
Would these brands be forced to accept the same terms as BYD (a RM200,000 Bingo would be absurd), or would they be allowed to continue with their previous agreements just because they started earlier? If so, how long would these double standards (which foreign carmakers absolutely love) last?
All this reeks of the customised incentives under the Energy Efficient Vehicle (EEV) scheme, in which carmakers worked with the government behind the scenes to gain their own benefits – some more successful than others. This only sought to entrench Thailand’s dominance in the region. What happened to all those promises for a fairer system?
Exports to nowhere
We then come to the other requirement – that BYD has to export as much as 80% of its Malaysian production overseas. The only question that we (and I’m sure the company as well) have to ask is…where on Earth will it export all those cars to?
Let’s look at the numbers. Last year, BYD sold 14,407 vehicles in Malaysia, and if it wants to achieve a reasonable return on its plant investment, it will no doubt want to sell more. But even with a conservative target of 15,000 annual sales, it will then have to export 60,000 units to other markets.
Such a figure would make BYD Malaysia’s biggest exporter by a huge margin. Even Proton struggles to export a tenth of that figure, while BMW sent 11,400 vehicles from its plant in Kulim, Kedah to markets such as Thailand and the Philippines last year.
And unlike BMW, BYD wouldn’t have Thailand to count on, because the company already operates an assembly plant (and a battery assembly factory to boot) in the Land of Smiles; ditto in Indonesia. That would leave the Malaysian plant with only smaller, mostly left-hand-drive ASEAN markets (and Brunei) for it to sell its wares to, making it impossible to achieve anywhere like the kind of volume MITI is demanding. Not to mention that for these countries, getting their cars from China is usually more cost-effective, anyway.
Then again, if BYD truly is resigned to selling cars above RM200,000 in Malaysia, then its sales will be much lower than they are currently – which means it will also have to export far fewer cars to overseas markets. Perhaps this is the grand idea that MITI is banking on.
Protecting…whom, exactly?
The spectre of protectionism has loomed over the Malaysian automotive industry ever since the idea of a national carmaker was mooted in the 1980s. Still, the government has long sought to distance itself from accusations of such, preferring instead to attract foreign investment. We all know that there are measures in place to shield Proton and Perodua, but their existence is mostly nebulous and rarely explicitly mentioned.
Which is why it was so surprising to hear minister Johari make such a clear reference to protectionism in The Edge‘s interview. He said that the new requirements were put in place to safeguard Proton and Perodua – claimed to include over 50% of local content in their cars – as well as the jobs of some 700,000 people within the wider local automotive ecosystem.
But that argument falls on its face upon the slightest scrutiny. It may be true that most of Proton’s combustion-engined cars have over 50% local content, but the same cannot be said of its eMas EVs and plug-in hybrids. Just one model out of the three – the eMas 7 – is currently assembled in Malaysia, and even this is classified as a semi knocked down (SKD) product, not a completely knocked down (CKD) one.
That means the car is simply assembled in Malaysia without much in the way in the local content, and right now, Proton’s much-vaunted EV plant does not even have a paint station. Even on proper CKD models, we’ve previously seen Proton’s propensity to source parts from more price-competitive Chinese suppliers instead of local vendors (not like this would’ve been different with BYD, but whatever). Perhaps this will change further down the line, but right now, the new measures seem to protect only Geely, not Proton.
Proton and Geely’s advantage is compounded by the fact that their eMas EV models are all able to be sold at under RM100,000. This includes the eMas 5, which is still fully imported and benefits from a special CKD bridging programme, allowing Proton to sell thousands of CBU units at CKD-level pricing, instead of the mere hundreds that other companies are limited to.
Plus, Proton is free from any real expectations of exports. While the eMas 7 is technically exported to small markets such as Nepal and Mauritius, Proton currently exports cars that are made in China, not Malaysia (although this will soon change). Also, Proton is shut out from major markets such as Thailand and Indonesia, because Geely operates its own plants there – contrary to past promises.
As for Perodua, it promises that its new QV-E will have 50% of local content early this year, and up to 70% a full four years from now, in 2030. That’s better than most Protons, but it’s still a long way off from the company’s usual standard of around 95%.
Not that it makes much of a difference, because Perodua only sold one unit last month. You could say this underperformance was down to the firm’s own missteps rather than the competition eating up its potential sales volume. Nevertheless, does MITI seriously think that taking BYD out of the equation will result in a meaningful increase in sales? Surely not.
Finally, with regards to protecting the workforce, I’d argue that throwing a wrench in BYD’s plans causes more harm than good. Think of all the potential jobs that will be flushed down the drain as a result of the plant’s scuppering – remember, the company chose Tanjong Malim as its location to be closer to Proton’s vendors, so its loss is their loss, too. Not to mention the livelihoods of sales and service personnel now that they will have no more affordable BYDs to sell and maintain.
Squandering a golden opportunity
This is all the more bewildering given the current global context. The war in Iran has caused crude oil prices to surge (Brent crude is trading at US$116.33 per barrel at the time of writing), and while most Malaysians have yet to feel the burden thanks to Budi95 subsidies, the government certainly has – it’s been reported that the country is spending as much as RM4 billion a month to maintain RON95 petrol at its current retail price of RM1.99 per litre.
And there is no indication that the cost of the fuel will hold. The subsidy quota is already set to be slashed from 300 litres to 200 come Wednesday, and with the war showing no signs of ending, prime minister Anwar Ibrahim has indicated that the government will only be able to maintain the current price for another two months before it will have to raise it. Against this backdrop, it is in the best interest of the country for Malaysians to make the switch to EVs – if only to keep our coffers flush.
Yet, frustratingly, MITI seems to be shooting itself in the foot by artificially raising the price of EVs, at the precise time that Malaysians’ interest in EVs is higher than possibly ever before. The buying public wants more choice, not less, especially in the budget segment – and this move risks alienating people already turned off by stagnant market offerings.
Not a problem, the government will surely say – the public can still choose from a variety of affordable EVs from national carmakers, most notably the Proton eMas 5. Therein lies the problem: we only managed to get to the point of Proton’s EVs being cheap thanks to stiff competition from, among all places, BYD.
With BYD (and others) being sidelined, Proton and Perodua will no longer have any incentive to lower prices, because Malaysians will have no other alternative than to buy “local”. Without any competition, companies will always choose to increase profits above all else, and the buying public always loses.
Implications for the wider industry
The tone of The Edge‘s piece suggests that MITI has accepted losing BYD’s investment as a fair trade for protecting the interests of our national carmakers. It will do so at its own peril.
Proton and Perodua do not operate in a vacuum. They are part of a massive global ecosystem currently undergoing a seismic shift, and even experienced players are finding it tough out there. Killing off their rivals at home may improve sales in the short term, but it only seeks to make them less competitive outside of Malaysia – and even these companies know they cannot rely on local sales volume forever.
Then there’s the local automotive industry – those 700,000 workers that MITI wants to protect, they all benefit from a vibrant, thriving economy that feeds off of investment both local and foreign. Proton and Perodua alone aren’t capable of supporting this economy on their own, and the powers that be know this.
Perhaps most important is the perception that Malaysia is portraying to the world with these new requirements. It shows that the government is willing to forgo foreign investment in service of its own agenda, even at a huge cost to itself.
It also shows that this country may not be such a reliable partner after all – that maybe China and the rest of the world are better off putting their money towards other, more welcoming markets. It’s a lesson the Japanese, the Germans and many others know all too well.
And just like that, all the government’s talk about wanting to become an automotive hub, its constant jealousy of rivals like Thailand and Indonesia taking up the lion’s share of foreign investment, all that counted for nothing after all.
What about you – what’s your take on this latest development? And should the government continue to protect Proton and Perodua? Let us know in the comments.
