US EV policy rollback fuels China's rise in Malaysia, dims Tesla's edge

New Straits Times

2 days ago

KUALA LUMPUR: Malaysia's electric vehicle (EV) market may be on the cusp of a turning point as shifting global tides, particularly the United States' rollback of EV incentives, reshape the competitive landscape and weaken Tesla's global momentum.
The US' move to end its US$7,500 federal EV tax credit and phase out emissions-related regulatory credits, signed into law on July 4, is expected to weigh on Tesla's future earnings and competitiveness, especially in price-sensitive markets.
The incentives, which expire after Sept 30, had been instrumental in fueling EV adoption in the US and supporting Tesla's dominance. The company has already posted its weakest quarterly profit in over a decade, hit by falling deliveries and lower vehicle prices.
With that safety net set to disappear, analysts say the door is now open for rival brands, particularly from China, to gain ground in emerging markets like Malaysia.
"Brands like BYD, Great Wall Motor (ORA), and Chery are expanding aggressively through competitive pricing, faster product rollouts, and local partnerships," said automotive analyst Rosli Khan.
He added that Tesla's lack of local manufacturing or assembly, along with its premium positioning, leaves it vulnerable in a price-sensitive and infrastructure-dependent market like Malaysia.
"With Tesla's expansion slowing, Chinese brands can now accelerate their market dominance through local assembly and better after-sales support—areas where Tesla has been relatively absent," Rosli said.
He also pointed out that Malaysian buyers are increasingly gravitating toward mid-range, functional EVs rather than high-tech, premium models, a trend that plays directly into the hands of Chinese players with localised strategies.
Amid growing demand in this mid-market segment, another analyst Hezeri Samsuri said Malaysia's own EV tax incentives, set to expire at the end of 2025, could tip the scales against premium players like Tesla.
"Tesla might be a strong global brand, but in Malaysia, they can be replaced by other EV brands. Once the incentives end, the gap they leave will likely be filled by various other players," said Hezeri.
He also said the government must look beyond attracting EV brands and focus on ensuring a robust after-sales ecosystem, especially if foreign players begin to retreat once the tax holidays expire.
Malaysia's EV tax incentives currently include full import and excise duty exemptions for fully imported EVs, road tax exemptions for EV owners and tax breaks for locally assembled models.
However, with the exemptions for imported EVs and road tax set to expire at end-December, EV prices, particularly for premium imported brands like Tesla, are expected to rise significantly, weakening their competitiveness in the local market.
Meanwhile, despite efforts to position Malaysia as an EV hub, both analysts agreed that the country continues to trail behind regional pacesetters like Thailand and Indonesia.
"Malaysia has political stability, a strong manufacturing base, and solid port infrastructure, but delays in EV charging infrastructure, slow regulatory approvals, and inconsistent coordination between federal and state governments remain significant bottlenecks," Hezeri said.
"Thailand and Indonesia offer better EV policy execution, clearer investment roadmaps, and more complete supply chain ecosystems."
Even so, Rosli said Malaysia can still carve out a niche as a Tier-2 or Tier-3 manufacturing hub, especially for Chinese EV makers seeking to hedge against Western geopolitical risks, if structural reforms are implemented decisively.
Looking past showrooms and into the supply chain, they said Malaysia could evolve from a passive EV consumer to a strategic contributor in the regional EV manufacturing network, particularly in high-value areas like battery systems, software integration, and electronics.
Electronikar editor and analyst Shamsul Yunos said national automakers Proton and Perodua would be better served by partnering with Chinese players rather than trying to outpace them.
"Malaysian automakers can forge strategic partnerships with Chinese manufacturers and focus on niche market development by leveraging their technology and supply chain," he said.
Shamsul added that Malaysia's automotive policy must shift away from low-value assembly towards high-value activities such as research and development, especially in battery packaging, battery management systems and power electronics.
"Regardless of the US policy shift, the last 40 years show Malaysia needs to move beyond export substitution and develop deeper technical capabilities," he said.
Rosli echoed this sentiment, noting that Malaysia's mature semiconductor industry gives it a head start in EV component production, particularly in sensors, power electronics, and control systems.
"The government should align investment incentives with local capability-building through talent development and supply chain localisation.
"If this alignment is achieved, Malaysia could integrate more deeply into the EV manufacturing network, not just with Chinese brands but also with Japanese and Korean Tier-1 suppliers," he said, adding that such a move could position Malaysia as a strategic springboard into the Asean EV market.