Thailand’s EV backlash shows why Malaysia’s caution is justified

 EV policy should not make local assembly and local parts makers weaker while imported vehicles become more competitive.

From Rozannah Jeffrey

Thailand’s latest automotive debate deserves close attention in Malaysia because it exposes a basic policy problem: EV growth can look impressive on paper while weakening the industrial base underneath it.

According to reports, 10 Thai automotive groups representing more than 1,500 businesses are now pushing for tougher protection against fully imported EVs. Their proposals include a 32% excise tax on imported EVs, import quotas tied to local production, and stricter local-content rules.

Their complaint is straightforward: cheaper Chinese EV imports are eroding local production and reducing orders for Thai parts makers. They also say producing vehicles in Thailand costs about 30% to 40% more than importing them from China.

That matters because Thailand is not a weak automotive economy. It is one of Southeast Asia’s main production centres. If industry groups in Thailand are already warning that import-led EV growth can weaken domestic manufacturing, Malaysia should treat that as a serious signal, not an isolated complaint.

The issue is easiest to understand through a simple comparison. A country can be a strong EV market without becoming a strong EV producer. Those are not the same thing.

A strong market buys cars. A strong producer builds value.

If the vehicles are imported, the larger share of engineering, supplier activity, export earnings and industrial learning stays outside the country. The local consumer gains a new product. The local economy may gain much less.

That is why the conditions around foreign EV investment matter.

In March, it was reported that Chinese carmaker BYD was likely to reevaluate its Tanjung Malim assembly plans after failing to agree to conditions attached to the proposed local assembly arrangement. The investment, trade and industry ministry (Miti) later said the conditions were not unique to BYD but reflected a broader approach to new automotive investments.

The logic behind those conditions is not difficult to follow. If Malaysia gives policy support, tax advantages or market access, it should ask for more than domestic sales. It should ask for localisation, exports, supplier development and real manufacturing depth.

Thailand is now asking a similar question. Its industry groups are not saying EVs are bad. They are saying EV policy should not make local assembly and local parts makers weaker while imported vehicles become more competitive. That is a serious industrial policy argument, and Malaysia should not dismiss it.

BYD’s regional footprint makes this even clearer. Reuters reported that BYD’s Thailand factory has 150,000 units of annual capacity, and that BYD’s Indonesia plant is also planned at 150,000 units a year.

Those are not token investments. They show where scale is being built. Malaysia therefore has every reason to ask a simple question: are we being offered a real production role, or mainly a retail role?

This is where many public arguments become confused. A cheaper EV is not automatically a better national outcome. Low sticker prices can help adoption, but policy should be judged by where long-term value stays.

If the parts ecosystem weakens, local vendors lose orders and production capability remains abroad, then the country has improved consumption without strengthening industry.

A useful analogy is the difference between a port and a warehouse. Both move goods, but only one is part of a larger trading system. In the same way, a country can move a lot of EV units without becoming part of the real production chain.

That is why Thailand’s backlash matters. It shows that the problem is not personal, and not unique to Malaysia. It is regional. Southeast Asian governments are starting to realise that EV growth alone is not enough. The deeper question is whether that growth builds domestic capability or bypasses it.

Malaysia should remain open to foreign EV investment. But openness should come with terms.

Otherwise, the country risks becoming a successful showroom without becoming a serious producer. - FMT

Rozannah Jeffrey is an FMT reader.

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