It said such a move could lead to foreign players pricing their EVs more competitively, enabling them to corner a large enough share of the market to make it viable to set an entire ecosystem to serve their needs.
This, FMM president Jacob Lee said, could squeeze out players in the already established Malaysian ecosystem, such as suppliers, vendors, and SMEs, leading to job losses, given that employment is so deeply tied to the automotive supply chain.
“Malaysia’s automotive industry is built on a very interconnected ecosystem developed over several decades,” he pointed out.
Today, the entire ecosystem accounts for slightly over 700,000 workers, many of whom work in small and medium-size firms that are likely to struggle to survive if higher-value activities such as research and development, are displaced.
Lee cautioned that if policy emphasis shifts too rapidly towards market access for foreign players without sufficient development requirements, higher-value activities could be marginalised — leaving local firms stuck with lower skilled jobs.
“The ministry of investment, trade and industry’s (Miti) approach recognises that job protection is best achieved through sustaining and upgrading the manufacturing ecosystem, rather than relying solely on downstream assembly or distribution activities,” he pointed out.
“This gives much (more) value to the local manufacturing industry, especially in terms of skills upgrading, technology transfer and job creation,” he added.
An industry source who requested anonymity said the risk is not remote, warning that workers in the local automotive supply chain could be the first to feel the strain if Malaysia becomes primarily an assembly base.
“In contrast, local car manufacturers, while also working with foreign partners, are anchored in a deeper local ecosystem. They support hundreds of Malaysian vendors, have localisation levels above 75%, and contribute to jobs, SMEs and broader industrial capabilities,” the source said.
On Tuesday, Miti defended the conditions imposed on new foreign investments in the Malaysian EV sector, saying they are designed to support long-term industrial development rather than restrict market entry for foreign players.
Its minister, Johari Ghani, said Chinese automaker BYD was granted an interim manufacturing licence in September 2025 for a proposed assembly plant in Tanjung Malim, based on an export-oriented production model aligned with the National Automotive Policy and New Industrial Master Plan 2030.
Johari said Miti’s approach was not protectionist but developmental, saying investments without clear export commitments or localisation plans would provide limited advantages to the local automotive ecosystem.
He also said Putrajaya is reviewing the current EV pricing framework, including the RM100,000 floor price for imported vehicles — a temporary move for now — as part of a broader strategy to prioritise local assembly and higher-value manufacturing over long-term reliance on imports.
His statement came in response to BYD’s decision to re-evaluate its proposal to set up an assembly plant in Tanjung Malim, citing overly strict conditions for its decision.
Among others, Malaysian policy mandates a minimum on-the-road price of RM100,000 for new cars, and 80% of production must be for the export market.
In a recent opinion piece on FMT, economist Jamil Ghani said the national EV conversation has become overly focused on affordability, cautioning that this raises the risk of overlooking the sector’s broader economic importance.
While lower prices are key to consumer adoption, he said, policymakers must also account for the automotive industry’s wider role of not only supporting employment in the large network of vendors but also contributing to about 4% of GDP.
He said consideration must be given to the production side of the ecosystem where thousands of workers depend on the country’s long-established network of manufacturers, suppliers and skilled labour.
The industry source also said that current foreign investments in the EV sector in Malaysia raised the risk of turning the country into a low-value assembly hub, especially if localisation of high-value activities is not strengthened.
This, the source said, could limit job creation and curtail opportunities for local players.
“BYD’s current completely knocked-down (CKD) approach is largely assembly-driven. Many key components, including major structures, are produced overseas and brought into Malaysia for final assembly,” the source added.
“This means Malaysia captures assembly activity, but much of the higher-value manufacturing and component production remains outside the country. The key difference is not assembly, but how much of the supply chain, capability and value is created and retained in Malaysia,” he added.