Warnings are increasing regarding the vulnerability of Malaysia's automotive industry to a price war driven by Chinese electric vehicle (EV) manufacturers.

With US tariffs set to affect China's economy, experts suggest that Chinese EV manufacturers are likely to begin shifting excess production capacity into Southeast Asia. This presents a challenge to Malaysia's home-grown automotive sector.

An executive of a Consulting Agency, stated, "Chinese OEMs (original equipment manufacturers), particularly BYD, Nio, and Xpeng, will divert production to markets where regulatory resistance is minimal, national competition is non-existent, and growth potential is unfulfilled. ASEAN fits this profile."

In March, 2025, Chinese EV manufacturer BYD offered discounts of up to MYR 26,000 (US$ 5,900) on its top-line Atto 3 electric SUV, reducing its price to MYR 123,800 (US$ 28,000). This brought it into the same price range as the premium version of Malaysia's Proton e.Mas 7, the company's first EV offering.

The local industry is facing pressure from the low-cost strategies employed by Chinese manufacturers.

Proton's Deputy Chief Executive, Roslan Abdullah, warned that price wars could threaten tens of thousands of local jobs, as the domestic industry lacks the scale to compete with the discounts offered by Chinese carmakers.

In Thailand, authorities launched an investigation in 2024 following complaints from customers who were misled into purchasing cars before Chinese brands announced new discounts, leaving early EV adopters with higher loans and reduced resale values.

Chinese EV manufacturers currently hold about 80% of Thailand's EV market, where zero-emission electric cars account for 10% of total vehicle sales, according to an executive of a global consultancy firm.

"While Chinese OEMs benefit from price competitiveness, their quality has improved in recent years, suggesting that factors beyond price are also contributing to their success," the executive further noted.

Chinese EV manufacturers, including BYD and Chery, have seen growth in the region over the past two years.

BYD's market share in ASEAN's six largest economies grew to 1.8% of total passenger automotive sales in 2024, while Chery expanded its footprint to 1.0% in the same year, according to an industry report.

In 2022, the combined market share of BYD and Chery was just 0.1%. The increase in Chinese EV market share in the region occurred alongside the US imposing earlier tariffs of 100%, and the European Union levying tariffs of 38%, which reduced profitability for Chinese EV manufacturers.

Trump's latest tariffs are expected to contribute to the expansion of Chinese EVs in Southeast Asia, according to an executive of an Consulting Agency.

The executive further noted, "With China's domestic EV overcapacity (capacity utilisation rates below 60% for some OEMs), Southeast Asia is becoming a strategic pressure valve."

"Entry-level EVs priced below MYR 100,000 are already being tested, and once these models scale, the local and Japanese mid-tier segments will be impacted," he further added.