Malaysia has officially implemented stricter regulations governing the import of completely built-up (CBU) electric vehicles (EVs), significantly narrowing the market opportunity for Chinese automakers such as BYD, which have expanded their presence in the country's new energy vehicle sector.

The new regulations, introduced by the Ministry of Investment, Trade and Industry (MITI), came into effect on July 1st, 2026. The Malaysian government stated that the measures are intended to attract high-quality investments, encourage technology transfer, strengthen the local automotive supply chain, and support industrial development in line with the model established by domestic automakers Proton and Perodua.

New import thresholds

Under the revised framework, any CBU electric vehicle imported into Malaysia must simultaneously satisfy two mandatory requirements. First, the vehicle's Cost, Insurance and Freight (CIF) value must be no less than MYR 200,000 (US$ 49,165). Second, the electric motor must produce at least 180kW.

As final retail prices include additional taxes, operating costs and profit margins, vehicles meeting these requirements are expected to be sold at prices significantly above MYR 200,000.

Impact on Chinese brands

The policy is expected to affect Chinese automakers that have gained market share through competitively priced electric vehicles. According to data from Malaysia's Road Transport Department (JPJ), Chinese brands, excluding Geely-owned Proton, accounted for approximately 60% of Malaysia's new energy vehicle market in 2025.

However, many of the models that contributed to this growth no longer qualify for import under the new regulations. BYD's current Malaysian product portfolio comprises seven models, all of which have starting prices below MYR 200,000. In addition, the BYD Dolphin and the entry-level Atto 3 do not meet the minimum 180kW power requirement. Other Chinese models, including the Zeekr 7X and Chery Omoda E5, also fail to satisfy the new import criteria.

The restrictions have been introduced despite the strong presence of foreign EV manufacturers in the Malaysian market. Following concerns that government incentives and subsidies were primarily benefiting foreign manufacturers, the Malaysian government adopted a different policy approach by tightening import requirements.

Local production faces stricter requirements

Chinese manufacturers have also encountered additional challenges in their efforts to establish local production operations as a means of bypassing import restrictions. Malaysia has imposed stringent conditions on all new vehicle manufacturing projects approved after September 1st, 2025.

Under the new rules, vehicles produced under such projects must have a minimum selling price of MYR 100,000. In addition, at least 80% of total production must be exported, while domestic sales are limited to 20%. Manufacturers are also required to complete key production processes within Malaysia, including welding, painting and final assembly, as part of efforts to increase local value creation.

These requirements have affected several proposed projects. BYD's planned completely knocked-down (CKD) facility in Tanjung Malim, Perak, which was expected to cover approximately 600,000 square metres, has reportedly stalled. Analysts cited by Caixin stated that the mandatory 80% export requirement may prove difficult for BYD to satisfy, given the company's existing manufacturing capacity in Thailand, Indonesia and China.

Existing partnerships provide an alternative route

While new manufacturing projects face tighter regulations, some Chinese automakers are maintaining their presence in Malaysia through partnerships that utilise existing production facilities. In June 2026, Leapmotor began local assembly of its C10 model at a plant in Gurun, Kedah, using Stellantis' existing manufacturing infrastructure.

Similarly, Xpeng announced plans to begin production of its right-hand-drive G6 model through cooperation with local manufacturer EPMB. As these programmes utilise existing facilities rather than new manufacturing projects, they are not subject to the mandatory 80% export requirement. These arrangements provide an alternative pathway for manufacturers seeking access to the Malaysian market while complying with the country's evolving industrial policies.

International context

Malaysia's approach differs from that of countries bound by broader free-trade commitments. For example, South Korea has signed free-trade agreements with numerous countries and economic blocs and is required to comply with the World Trade Organization's national treatment principle. As a result, the introduction of similar restrictions could create a risk of trade disputes, limiting the country's ability to implement comparable measures.

Malaysia, however, maintains that its latest policy framework is intended to encourage higher-quality investment, promote technology transfer, strengthen the domestic automotive ecosystem, and support the development of local manufacturing capabilities.