Four years ago Malaysia waived import taxes on electric cars, part of a plan to move away from fossil fuels.
The country was not making electric vehicles at the time, and Chinese automakers started shipping models like the BYD Atto 3 by the thousands. Soon Chinese companies came to dominate Malaysia’s small but growing E.V. market.
But the import-tax holiday ended on Dec. 31, 2025. More recently the Malaysian government announced new restrictions on imported cars. The minimum sale price of imported E.V.s is being doubled to 200,000 ringgit or about $50,000, according to Johari Abdul Ghani, Malaysia’s trade minister.
The aim is to protect jobs because Malaysia’s own carmakers are now making E.V.s. The government is hoping to push Chinese companies to assemble and manufacture vehicles in Malaysia.
China has flooded countries around the world with exports, often at low prices. The policy changes in Malaysia show how China’s manufacturing heft can force governments to make tough choices between promoting its auto industry and creating jobs, while protecting homegrown companies from foreign competition.
Two of the Chinese carmakers operating in Malaysia, BYD and Chery, would benefit from tax incentives the government is offering to companies that set up assembly plants. The companies will also face Malaysian government rules that apply to all foreign E.V. makers: Only 20 percent of the cars the plants make can be sold in Malaysia — the rest must be exported — and have to be sold at a minimum price of 100,000 ringgit.
“In the long run, we want to ensure that manufacturers produce car components in Malaysia for assembly, rather than relying heavily on imports,” Mr. Johari said in an interview.
It was unclear if BYD, which was slated to build its assembly plant in the state of Perak, will go forward with its plans. The company said it is “still reviewing all possibilities and aligning internally,” declining to elaborate.
Chery, however, is moving forward with its plans to build an assembly plant on the outskirts of Kuala Lumpur, the capital city.
Men Lin Bo, an executive vice president at Chery Corporate Malaysia, said the company had begun building the facility, which will produce gas-electric hybrid and gasoline-fueled cars. “Construction at the site is ongoing and progressing well. We hope to produce some cars by this year,” he said.
The rules limiting domestic sales do not apply to foreign manufacturers that use the three existing assembly plants in Malaysia, the trade ministry said.
“E.V. makers will be considering whether it makes sense to set up manufacturing facilities in Malaysia if they already have plants elsewhere in Southeast Asia,” said Ramone Mikgail Kok, the investment research and advisory head at Hong Leong Bank based in Kuala Lumpur.
The rise of Chinese automakers can be seen across Malaysia’s car districts. An area about 20 minutes from Kuala Lumpur, which was long dominated by Japanese and European brands, now includes several Chinese automakers.
Malaysia’s biggest domestic carmakers, Proton and Perodua, each introduced electric vehicle models last year. Perodua spent over $200 million developing the QV-E, its first electric model. Proton, in the first three months of the year, sold 6,701 of its e.MAS 5 electric car, far outpacing the 999 units of BYD’s Atto 3. Geely, a Chinese automaker, owns 49.9 percent of Proton.
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