China’s car surge puts pressure on Malaysian policy and car buyers

 The pace of change showcased at the Beijing motor show suggests that the national automotive policy needs to be reviewed, with an emphasis on outcomes rather than aspirations.

For the past 40 years, I’ve attended Tier 1 auto shows all over the world. Advances in technology were gradual, so every show felt important. But all that has changed in the past six years, with China’s rise to the top as the world’s largest car market, along with its dominance in manufacturing lithium batteries and EVs.

China’s auto shows are now the only ones booming. Even Tier 2 shows like Guangzhou’s are compelling.

The Geneva Auto Show has wound up. The Tokyo Motor Show has rebranded itself as a mobility show. Detroit’s auto show has become less relevant considering that the money spent on one US-made family car can buy three Chinese electric vehicles (EVs).

This year’s Beijing International Automotive Exhibition was a stunner, featuring 1,450 cars, of which 181 were making their world debuts.

While Chinese cars dominate the EV segment, they also offer top-end technology in combustion engines. With their world-leading supply chain — i.e., Tier 1 component vendors — they are addressing demand for electric cars that can also be fuelled by petrol: plug-in hybrid electric vehicles and range-extended electric vehicles.

Legacy firms move in

What stands out this year is the growing presence of legacy global automakers partnering with Chinese firms. These partnerships are driven by necessity. China’s automotive ecosystem now delivers development cycles that are significantly faster and costs that are markedly lower than those of traditional manufacturing hubs.

In practical terms, this means: “If you can’t beat them, join them.”

After 42 years of building cars in a joint venture with SAIC Motor in Shanghai, Volkswagen this year debuted two electric vehicles designed and manufactured in China for both domestic and global markets.

Similarly, the Jaguar Land Rover group has evolved. From starting full-scale production operations 14 years ago in partnership with the Chery Group, it has now progressed to designing and producing its first EV with its Chinese partner.

This was presented at the Beijing show as Chery’s new Jetour EV model, which will go on sale in October with a list price of about US$20,000. It is understood to represent what will eventually become the first EV from Jaguar Land Rover, to be sold under the Freelander brand.

Impact on Malaysia

For Malaysia, all this presents a challenge to long-standing policy assumptions. The National Automotive Policy 2020 was drafted when China was still below the radar as a global automotive leader.

However, the pace of change showcased in Beijing suggests that the NAP needs to be reviewed, with an emphasis on outcomes rather than aspirations.

Malaysia’s automotive landscape is closely tied to Proton, long seen as a symbol of national industrial ambition. Yet Proton’s strategic partnership with Geely highlights a deeper reality: the line between domestic and foreign capability is increasingly blurred.

Geely brings scale, advanced platforms, and access to China’s fast-moving innovation ecosystem — advantages that would be difficult for any standalone national automaker to replicate.

This creates a policy tension. On one hand, there is a desire to protect domestic industry players to preserve jobs, local vendors, and national identity. On the other, excessive protection risks insulating the market from competition at a time when global benchmarks are rising quickly.

The issue is not protection per se, but whether it remains fit for purpose in a dramatically different global environment.

Price vs performance

For Malaysian consumers, the implications are significant. First, the price-performance gap is likely to widen. Chinese-developed vehicles—particularly EVs and strong hybrids—are improving rapidly while becoming more affordable.

If the domestic market is shielded from these trends, buyers may face higher prices or slower access to new technologies.

Second, expectations around technology are shifting. Features such as advanced driver assistance systems, seamless infotainment integration, and over-the-air software updates are becoming standard in China-linked vehicles but may not be as readily available if competition is restrained.

Malaysian buyers exposed to these advancements may begin to demand similar value across all segments.

Third, consumer preferences could increasingly diverge from policy intent. Even with incentives or protective measures favouring national brands, buyers tend to gravitate toward vehicles that offer the best overall value.

In a more connected and informed market, shielding consumers from global competition becomes harder to sustain.

None of this suggests that Malaysia should abandon its ambition to build a strong domestic automotive industry.

Need for integration

Rather, it points to the need for recalibration. Competing in today’s environment — and within Malaysia’s fragmented car market — may require less emphasis on local assembly and more focus on integration: deeper participation in regional supply chains, partnerships that accelerate technology transfer, and investments in high-value areas such as electrical and electronics, software, and mobility services.

Ultimately, the lesson from Beijing is not just about China’s rise, but about cost and the compression of time in industrial competition.

Development cycles are shorter, innovation is more iterative, and scale matters more than ever. Policies designed for a slower era risk falling out of sync with these realities.

Malaysia now faces a choice. It can continue to anchor its automotive strategy in an industrial past shaped by protection and gradual upgrading, or it can adapt to a future defined by speed, openness, and intense competition.

For Malaysian car buyers, the outcome of that choice will determine not just what they drive, but how much value they receive – think about models like the VW ID Aura T6, an EV made in partnership with FAW’s Changchun plant, and the VW ID Unyx 08, which uses an electronic architecture co-developed with Chinese partners. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.