From Jamil Ghani
Malaysia’s electric vehicle (EV) transition is increasingly being framed around a single question: how quickly prices can fall. This, however, is incomplete.
Lower prices matter. For many Malaysians, affordability determines whether participation in the EV transition is even possible.
But public policy cannot be reduced to the lowest sticker price, particularly when the automotive sector supports more than 700,000 workers, spans hundreds of specialised vendors, and accounts for about 4% of GDP.
The issue is not simply one of consumption. It is also one of production.
Malaysia’s automotive industry is underpinned by a dense ecosystem of suppliers, manufacturers and technical capabilities developed over decades.
This ecosystem is not abstract. It includes technicians, engineers, component makers and small firms — including vendors — whose livelihoods are tied to the automotive supply chain, supporting thousands of SMEs and communities across the country.
Developments in other markets provide a useful reference point.
In China, sustained price reductions — in some cases exceeding 30% — have been linked to rising inventory pressures and intense competition within the EV sector.
Industry participants have indicated that prolonged price competition has placed pressure on suppliers and affected parts of the supply chain, prompting regulatory concern over excessive competition.
In Thailand, rapid EV expansion has been accompanied by stock accumulation and operational strains. Reports highlight excess inventory, parts availability issues and extended repair times, which have affected after-sales performance and raised concerns within the industry.
These developments point to a broader pattern: price-led expansion can place pressure on different parts of the automotive ecosystem, even when consumer access improves.
Malaysia is not entering this transition without an existing industrial base. Localisation levels for national manufacturers already exceed 75%, with Perodua-Daihatsu at over 75% and Proton-Geely at 76% in 2025.
These outcomes reflect sustained investment in supplier development, manufacturing capability and engineering capacity.
It is within this context that current policy measures need to be understood.
The ministry of investment, trade and industry has outlined an approach centred on localisation, value creation and export-oriented production.
In practice, this includes an export-oriented production framework where domestic sales are limited to around 20% of output, alongside requirements for in-country assembly processes such as body, paint and trim operations. Locally assembled EVs are also subject to a minimum on-the-road price of RM100,000.
The intention is to ensure that new investment contributes to local supply chains, including domestic vendors, alongside technology transfer and higher-value manufacturing activities, rather than operating primarily as a sales market.
The question is how these conditions will unfold in practice.
Export-oriented production assumes that external markets can absorb a significant share of output.
For firms that already operate multiple production hubs across the region, additional exports from Malaysia would need to compete within existing regional and global supply chains.
The extent to which this can be sustained at scale will depend on market conditions beyond Malaysia’s direct control.
This does not negate the policy logic. It does, however, highlight the importance of calibration.
The broader competitive landscape further complicates this balance. BYD, for instance, reported receiving 12.47 billion yuan in government subsidies in 2025, accounting for a substantial share of its profits.
This suggests that competition in the EV sector is shaped not only by market forces but also by state support.
In this environment, policy choices involve trade-offs. Measures that support the domestic ecosystem may affect price dynamics in the short term.
Measures that prioritise rapid adoption may place existing capabilities under pressure.
Export-oriented conditions may strengthen integration into global supply chains but remain dependent on external demand.
There is no straightforward resolution.
The issue, ultimately, is whether Malaysia can navigate this transition in a way that preserves and upgrades its industrial base, while remaining open to new investment and technological change.
That balance will depend less on any single policy instrument, and more on whether the overall framework aligns with how firms make investment decisions and how markets evolve.
Jamil Ghani is a former associate researcher at the Institute of Strategic and International Studies Malaysia, and an FMT reader.
The views expressed are those of the writer and do not necessarily reflect those of FMT.