With what amounts to the third Gulf war under way, motorists are having to respond as before by tightening fuel consumption in the face of high energy prices.

This time, though, they have the option of buying electric vehicles, the most fuel-efficient of all passenger cars compared to petrol or diesel vehicles, with prices of almost all mass-market EVs below the combustion-engine equivalents.

This brings us to the point of buying an EV in Malaysia.

As Malaysia aspires to spur the economy through the automotive industry, the government decided to lower the tax on locally-assembled cars and impose a high tax rate on imported vehicles.

Any company that wants to sell mainstream cars in Malaysia must assemble them locally to stay competitive.

The BYD affair

The brouhaha this past week over BYD’s local assembly plans stems mostly from bureaucrats not understanding that manufacturing an EV is different from manufacturing a petrol or diesel car.

The EV has fewer parts, maybe 5,000 compared to 30,000.

Secondly, Chinese car companies have rewritten car manufacturing rules, with BYD, the world’s largest EV maker, leading the way. It supplies 70% of the EV with its own internal supply chain, from lithium mines to batteries and even to the ro-ro car carriers.

This business model is opposite to the traditional carmakers. The Japanese especially have fine-tuned the process so that their car companies buy about 70% of the components from their vendors, including Tier 1 vendors such as Aisin, Bosch, Continental, Delphi and Denso, to name a few.

So the controversy about BYD pulling out of Malaysia is probably a case of bureaucrats not understanding that local assembly of EVs must be judged differently, especially when the cost of an EV’s traction battery is about 30% of the cost of the car itself.

On local assembly

And when we talk about local assembly of cars, there’s a lot of grey areas. There are companies which boast of local assembly when they are nothing more than screwdriver operations with low-skilled foreign workers.

This unhealthy practice was perfected by a car czar whose company sold cars that benefitted from low taxes on locally assembled cars which were basically semi-knocked-down cars — these are imported in packs , with bodies already painted, and “local assembly” means fitting on the tyres which are already in the pack.

For Malaysia, this moment should not be wasted. We already have a great national champion in the Proton-Geely partnership and now is the time to be more welcoming to other Chinese brands like BYD, Chery, Great Wall, just to name a few, to increase their investment in Malaysia for local assembly.

While the new car manufacturing incentives are still in the drafting stage, the government must understand that New Energy Vehicles, the Chinese code for car electrification, is not just Chinese cars.

Volkswagen and BMW are already pushing back strongly. The new BMW iX3 to be launched at the coming Beijing Auto Show will boast an 800km range and 800-volt architecture enabling fast recharge times.

VW has developed a multi-function EV platform for SUV, sedan and MPV to be manufactured in the United States from next year.

New EV policy

Malaysia’s new incentives must include the previous investments if legacy carmakers venture into electric vehicles.

The case for EVs has always rested on a simple economic trade-off: higher upfront costs in exchange for lower running costs. When fuel prices are stable and subsidised, that trade-off appears marginal to most consumers. But when fuel prices spike suddenly, the equation changes decisively. The lifetime savings of EV ownership become not just theoretical, but tangible and urgent.

Malaysia must seize the moment to re-align the current EV policy framework with the energy crisis on the assumption that the Gulf War won’t go away soon.

If the goal is to accelerate EV adoption when consumers are most receptive, then access—not protection—must be the priority. A pragmatic first step would be to reinstate a 100% import duty exemption on EVs, which must be priced above RM100,000.

This should be framed as a temporary, targeted measure tied to prevailing fuel price conditions. Such a move would not only expand the range of EVs available to Malaysian buyers, but also send a clear signal of policy responsiveness at a time of economic stress.

Globally, the real momentum in EV adoption is happening in the RM70,000 to RM200,000 equivalent range—where value-for-money models are driving volume.

Need to build demand

Critics may argue that liberalising EV imports risks undermining local assembly ambitions. But this concern must be weighed against a more immediate reality: without sufficient demand, there will be little incentive for any manufacturer to localise production in the first place. Volume must precede localisation, not the other way around.

With a total industry volume of about 800,000 units a year, and with Perodua and Proton accounting for roughly 65% of sales, the remaining market is shared by more than 30 other makes. For most new foreign makes, the volumes simply do not justify such large upfront commitments.

The result is an outdated policy that has the unintended consequence of deterring precisely the new entrants and technologies Malaysia seeks to attract.

The broader point is this: it takes two hands to clap. It is not enough to promote EV adoption on one hand while constraining it on the other. Nor is it sufficient to set ambitious industrial targets without aligning them to economic fundamentals.

Fuel price shocks are disruptive, but they also create momentum for change. Malaysia now has this Gulf War opportunity to accelerate its transition to cleaner mobility.

But that will require a willingness to rethink existing policies and implement the changes quickly.

Yamin Vong is on Facebook at yamin.com.my.

The views expressed are those of the writer and do not necessarily reflect those of FMT.