2024 was a wake up call for traditional Japanese and European car makers. The Chinese have arrived to the game and they’re taking no prisoners. Chery went from the bottom of the list to the top 5 car seller by volume in the country despite some significant hurdles. BYD is almost single-handedly doing battle with Tesla despite being bound by more conventional car company conventions (partnering up with a local player for APs, setting up a vast dealer and service network). Other Chinese players have rapidly expanded in Malaysia and are doing relatively well, considering how ‘unknown they are to local buyers.
While some Japanese and European brands have managed to fight off these new Chinese players, it’s evident that many are having a really tough time. Despite a record-breaking 800,000 unit total industry volume in 2024, some major automotive players saw their overall volumes and market share shrink in Malaysia. What’s happening and what can be done?
Well, let’s start with the first half of that question – what is happening? At the end of 2024, we counted nearly 2 dozen Chinese car brands with operations set up in Malaysia. Without a doubt the brand that helped to open the floodgates was none other than Proton. After the company found a foreign strategic partner in Geely, they launched the Proton X70. This would have been a massive risk were Geely to introduce the Boyue themselves, but with Proton marketing, the car was an instant hit. It showed that if the pricing, product and narrative were right, most Malaysians had no problem spending money on a Chinese vehicle.
Meanwhile in China, homegrown brands had matured after decades of joint-ventures with foreign brands. Many factors, including the adoption of NEV-first policies, internal competition, private Chinese car brands entering the scene led to local brands producing better and better vehicles. EVs became the focus and seemingly overnight, the Chinese brands mastered the art of crafting and selling affordable high quality electric vehicles.
These Chinese brands found themselves in a very saturated domestic market and many started to focus on external market share. While Japan, South Korea, Europe and North America found ways to stop most Chinese manufacturers from entering, markets like Russia, Australia, the Middle East, parts of Scandinavia and many others have welcomed the competition with open arms.
Malaysia was one of the countries that welcomed the Chinese brands with open arms as long as Perodua was protected with an artificial RM100,000 price floor on all imported vehicles including tax-free BEVs. That means that the Chinese brands have been hyper-focused on fighting off just about any brand that doesn’t cater to first time buyers and those in the lowest income groups. In the case of electric vehicles, they’re also fighting off the premium makes, who have long since held the benchmark for NVH, tech, equipment and performance – areas where tax-free electric vehicles excel.
So, what can be done?
Well, to be honest 2025 is going to be another year of slaughter for a majority of legacy carmakers but it’s probably also going to be the last year that things are so tough. The government will likely discontinue their tax-free policy on imported electric vehicles by the end of 2025 and also might even revise the current price structure of locally-assembled electric vehicles going forward. This will take some pressure off the premium marques. Many nameplates are due a full model change. Hopefully a reversal of unpopular trends and a return to tactile, high quality, non-glossy interiors with real leather upholstery, real six (or eight) cylinder engines, and real character can help these brands recapture some market share. These aspects will always be luxuries in the automotive market and premium brands seem to have forgotten that.
As for the mass market brands, diversification of powerplants is probably the safest way forward. There are currently ZERO mainstream brands that are capable of delivering competitive EVs to the market. Many were introduced at prices that were too high or at specifications that were too low. Dead on arrival. Hopefully a new generation of mass market EVs from Japan and Korea will more directly address Chinese competition at all price points.
With regards to hybrids, we aren’t the biggest proponents of these powertrains but to the mass market facing the end of fuel subsidies, they may explode in popularity. It’s time to stop putting hybrids as the premium option and it’s also time for the Malaysian government to reduce taxes on hybrid vehicles to make them more competitive against ICE vehicles. Certain popular nameplates like the Corolla Cross and Civic come with both petrol and hybrid options, but we’d like for the gap in pricing between these two powertrain options to close and for new EV variants to be introduced.
It also feels as if traditional carmakers have forgotten the art of making an affordable car. Most entry-level Japanese cars are now close to RM100,000 and there’s no sign that this trend will reverse. However, the Chinese are offering very aspirational vehicles at not much more than RM100,000. Who can blame customers for wanting to ‘skip a step’? When I first started at DSF.my, the Nissan Almera was priced and positioned one rung above the Perodua Myvi. Today a Toyota Vios, Honda City or a Nissan Almera is priced like it’s worth twice as much but the Myvi today also offers ADAS, a 1.5L four cylinder petrol, a CVT, and 6 airbags. Mind you, Perodua don’t have a Myvi Sedan equivalent – the space is still open for any Japanese car maker to fill at an appropriate price and yet we have not seen a cheap but good option between RM65,000 to RM80,000.
Beyond that, there’s also one particular area where the Chinese just can’t get things sorted – dynamics. Very few Chinese car models can corner convincingly. Most of them have high-powered turbos under the hood and DCTs, but they’re tuned poorly and weigh too much and aren’t fun at all in the corners. Japanese car brands to a large degree have the advantage here. The Honda CR-V and Mazda CX-5 are two great examples – great to drive and they still find many customers today as a result DESPITE many direct competitors from China. Following this formula at multiple levels and perhaps even expanding motorsports opportunities between Japanese brands and INVITING the Chinese brands to participate as well could be a great way to do some chest thumping.
