Recently, the Malaysian Ministry of Investment, Trade and Industry (MITI) came under scrutiny following reports that the imposition of stringent conditions was prompting the Chinese electric vehicle (EV) manufacturer BYD to reconsider its proposed investment in a plant in Tanjung Malim, Perak, intended for EV assembly.

The public response and continued discussion surrounding this issue indicate the need for MITI to update its National Automotive Policy (NAP) and improve the communication of its policies to the public.

What has changed since the launch of the NAP in 2020?

When the NAP was launched in early 2020, its focus was threefold: (i) Next-Generation Vehicles (NxGV), within which electric vehicles formed only one component; (ii) Mobility as a Service (MaaS), aimed at preparing Malaysians for alternative ownership models; and (iii) Industrial Revolution 4.0 in manufacturing and assembly processes.

Since then, three developments in the automotive sector have emerged, necessitating an update of the NAP. First, the development of China's EV industry has altered the global market, with several manufacturers entering international markets with competitively priced EVs, including BYD, Chery, Zeekr and XPeng.

Secondly, several of these Chinese EV manufacturers have established joint ventures in Malaysia to assemble completely knocked down (CKD) units. These include Chery, in partnership with Legenda Beringin, involving an investment of MYR 2.2 billion (US$ 556.6 million) in a facility in Hulu Selangor to assemble internal combustion engine (ICE) vehicles, plug-in hybrid electric vehicles and EVs, with a target of 100,000 units annually; Zeekr, which plans to assemble its EVs at Proton's facility in Tanjung Malim; XPeng, through a joint venture with EPMB to assemble a range of SUV and MPV EVs, including range-extended EVs, in Melaka; and Great Wall Motors, which is producing its Haval line of hybrid EVs in Melaka.

Thirdly, there has been an increase in the price of unsubsidised petrol and diesel in Malaysia following the blockade of the Strait of Hormuz.

Within this context, the decision to impose export and localisation conditions on the proposed BYD plant in Tanjung Malim should be evaluated.

The challenge facing MITI in the automotive sector extends beyond the situation involving BYD. Consideration must also be given to the potential impact of increasing EV sales in Malaysia, particularly those of Chinese origin, even when assembled locally. This trend may affect the automotive components ecosystem, which includes local vendors and manufacturers of spare parts, car seats and electronic components. A report on this ecosystem was commissioned by the Malaysian Automotive Component Parts Manufacturers last year and submitted to MITI for further study, with the aim of aligning government automotive policies with the growing presence of Chinese EV assemblers. One area identified is the development of Malaysia's ecosystem for electrical and electronic components in EVs, which is linked to moving up the value chain in the semiconductor sector, as outlined in the New Industrial Master Plan 2030.

In addition, MITI is required to improve transparency in the deliberations and decision-making processes of the Automotive Business Development Committee (ABDC), a body responsible for evaluating incentive applications under programmes such as the Multi Sourcing Parts Programme and the Industrial Linkage Programme. This committee recommends tax and other incentives for CKD players, influencing pricing and profitability. A scorecard system for the ABDC was reportedly developed under the leadership of former MITI minister Tengku Zafrul Aziz, although public disclosures regarding this system have been limited. Without greater transparency, debates over the pricing of CKD versus completely built-up EVs and ICE vehicles are likely to continue without sufficient publicly available information.

A further challenge for MITI lies in rebuilding its policymaking capability in the automotive sector. For many years, key policy responsibilities were delegated to the Malaysia Automotive, Robotics and IoT Institute (MARii), under its former CEO Madani Sahari. Although MARii, as an agency under MITI, is mandated to provide sectoral input, policy authority resides with MITI officials. In March 2022, Madani Sahari was arrested by the Malaysian Anti-Corruption Commission on corruption charges. In 2024, he was convicted and sentenced to one year of imprisonment. During this period, many MARii staff left the organisation. Rebuilding internal capacity within MITI's automotive policy division and stabilising MARii under the leadership of its current CEO, Azrul Reza Aziz, who assumed the role in April 2023, will require time.

One gap in the NAP is the absence of a policy for EVs in the two-wheeler segment. This segment remains significant, with a large number of non-EV two-wheelers sold in 2025. A transition to electric two-wheelers may also reduce government expenditure on petrol subsidies.

Finally, MITI is required to collaborate with other ministries, including the Ministry of Finance, the Ministry of Transport, the Ministry of Natural Resources and Environmental Sustainability, and the Ministry of Energy Transition and Water Transformation, to align national strategies and targets for EV adoption. The NAP 2020 did not include explicit EV adoption targets, and the presence of competitively priced Chinese EVs had not yet materialised at that time. In the post-Covid-19 period, MITI announced a target of EVs accounting for 20% of total industry volume (TIV) by 2030 and 80% by 2050, as part of the National Energy Transition Roadmap launched in 2023. In 2024, EVs accounted for 5% of TIV, and this share is expected to increase, particularly if the quota for subsidised petrol is reduced and the price of subsidised RON95 rises later this year. Key policy considerations include the government's EV adoption roadmap, its impact on local component manufacturers, particularly within the ICE vehicle ecosystem, and its implications for reducing expenditure on petrol subsidies.

Effective public communication of MITI's policies in this area remains necessary, given that both the media and the public have become accustomed to regular updates via social media from former MITI minister Tengku Zafrul Aziz and his deputy Liew Chin Tong.

These challenges fall under the responsibility of MITI Minister Johari Ghani, his deputy Sim Tze Sin, and the ministry's senior management.