Malaysia Blocks Low-Cost EV Imports, Impacting Chinese Automakers
Malaysia has imposed stringent new import thresholds for fully assembled electric vehicles, a move that effectively blocks budget models from leading Chinese manufacturers including BYD Co. Ltd. Effective July 1, the Ministry of Investment, Trade and Industry (MITI) mandated that any completely built-up (CBU) EV imported into the country must have a declared customs value of at least 200,000 ringgit (~$49,019) and a motor output of no less than 180 kilowatts, as reported by Caixin.
A Strategic Pivot in Malaysia’s EV Policy
The new regulations mark a decisive shift from Malaysia’s earlier approach to electric vehicle adoption. Between 2022 and 2025, the country offered full import and excise duty exemptions for CBU EVs priced at RM100,000 and above, a policy that opened the door for Chinese automakers to rapidly capture approximately 60% of Malaysia’s new energy vehicle market. EV registrations surged 105% year-on-year in 2025, reaching 44,813 units.
With the exemption period expiring on December 31, 2025, MITI chose not to extend it. Instead, the ministry reverted to standard duties and added stricter conditions. According to MITI’s official statement, the revised conditions were communicated to franchise approved permit holding companies on April 30, with the ministry emphasizing its commitment to “a transparent, consistent, and balanced policy environment.”
Which Models Are Affected?
The impact on Chinese automakers is substantial. BYD, which led Malaysia’s EV market in 2025 with 14,407 imported vehicles sold, offers seven models in the country — all priced below RM200,000. Models including the popular Dolphin and standard Atto 3 fall short of both the price and power thresholds. Other affected vehicles include the Chery Omoda E5, Zeekr lower-end models, and the Smart #1 and #3.
Only premium models such as the BYD Seal, BYD Sealion 7, Tesla Model 3 Performance, and higher-end European EVs from BMW and Mercedes meet the new criteria, though they will face significantly higher retail prices. After sequential taxes — import duty of 5-30%, excise duty of 10%, and sales tax of 10% — plus dealer margins, eligible CBU EVs are expected to start at RM280,000-300,000 (~$68,600-73,500 USD), as detailed by CarNewsChina.
Protecting National Champions
At the heart of Malaysia’s policy shift is a familiar strategy: protecting the country’s national carmakers, Proton and Perodua. These companies and their supply chains support approximately 700,000 employees and contribute roughly 4% of Malaysia’s GDP annually. Proton’s e.MAS 5, a rebadged version of the Geely Galaxy E5, overtook BYD as Malaysia’s top-selling EV in the first quarter of 2026, with 6,701 units sold in Q1 alone, according to Channel NewsAsia.
MITI Minister Johari Abdul Ghani was blunt about the rationale. “These were the terms they couldn’t agree on. We have to protect our auto industry,” he told The Edge in March, referring to the reported standoff with BYD over its proposed RM1.3 billion assembly plant in Tanjung Malim, Perak.
The BYD Standoff
BYD’s planned CKD (completely knocked down) factory has become the focal point of tension between Malaysia’s industrial ambitions and Chinese investment. MITI’s conditions for new manufacturing projects approved after September 2025 include a minimum vehicle price of RM100,000, an 80% export mandate, and mandatory completion of welding, painting, and final assembly within Malaysia.
For BYD, whose vertically integrated business model produces approximately 75% of its components in-house, these requirements present significant economic challenges. The company already maintains production bases in Thailand and Indonesia, reducing the strategic necessity of a Malaysian plant under unfavorable terms.
Bill Russo, CEO of Automobility Ltd, told Channel NewsAsia that Chinese manufacturers are highly pragmatic: “They will invest where policy frameworks support scale, speed, and cost competitiveness — and will step back where conditions impose structural constraints.”
Workarounds and Regional Competition
Not all Chinese automakers are blocked. Leapmotor began local assembly of its C10 model in June at a Stellantis plant in Gurun, Kedah, bypassing CBU restrictions entirely. Xpeng also rolled out locally assembled G6 SUVs through a joint venture with EPMB. Because these initiatives use existing manufacturing infrastructure, they avoid the 80% export mandate applied to new projects.
Meanwhile, Malaysia’s ASEAN neighbors are pursuing more aggressive EV strategies. Indonesia offers localization mandates with incentives and has attracted commitments from BYD, Wuling, and Hyundai. Thailand’s EV3.5 program provides consumer subsidies and production ratio requirements, positioning it as the region’s EV hub. Malaysia’s more protectionist approach risks ceding ground to these competitors.
Consumer Impact and Broader Implications
For Malaysian consumers, the new policy means fewer budget EV options in the RM100,000-200,000 segment and potential 30-50% price increases on surviving models. Shahrol Azral Ibrahim Halmi, president of the Malaysian EV Owners Club, expressed frustration: “Some people are saying that consumers have been subsidizing the automotive industry in Malaysia for the last 40 years and are asking for how much longer they will have to continue doing so.”
The policy also risks straining Malaysia-China trade relations. China is Malaysia’s largest trading partner, and the move mirrors broader global pushback against Chinese EV dominance, following similar tariffs by the EU, Mexico, and Brazil.
What to Watch For
The key question remains whether BYD will proceed with its Tanjung Malim plant or redeploy investment to more favorable markets. Can CKD players achieve cost parity with Chinese CBU imports? Will Malaysia introduce consumer subsidies to offset higher prices? The answers will determine whether this policy succeeds in building a domestic EV industry — or becomes a brake on adoption and a hidden tax on consumers.