Malaysia's Automotive Industry: National Cars, the NAP and the EV Push

Most South-East Asian countries let foreign carmakers assemble on their soil and left it at that. Malaysia did something bolder and stranger: it decided the nation should own the car itself. Two badges born of that gamble, Proton and Perodua, still put more than three in five new cars on Malaysian roads today.

That choice, made in the early 1980s under Prime Minister Mahathir Mohamad, shaped a market that in 2024 sold a record 816,747 vehicles and built 790,347 of them at home, and then pushed on to a fresh all-time high of 820,752 units sold in 2025. It also created a policy machine, the National Automotive Policy, that is now wrestling with a very different question than the one it was built for: not how to protect a home-grown engine, but how to electrify a market that Chinese brands are entering fast.

Why does Malaysia have national cars at all?

Before Proton, Japanese manufacturers held more than 70% of Malaysia’s vehicle market, assembling completely knocked-down (CKD) kits through joint ventures. The domestic market was too small for any of them to reach real economies of scale, and the industry was essentially import-substitution with a foreign face.

The national-car project changed the terms. The Heavy Industry Corporation of Malaysia (HICOM), set up in 1980 to promote heavy industry, became the vehicle. In 1983 it founded Perusahaan Otomobil Nasional (Proton) as a joint venture: HICOM took 70% and Mitsubishi Corporation and Mitsubishi Motors the remaining 30%, on total capital of RM150 million. Proton was more than a company; it was industrial policy, meant to seed a base of local parts makers and expand Bumiputera participation in manufacturing under the New Economic Policy.

A second national marque followed in 1993. Perusahaan Otomobil Kedua (Perodua) was established as a joint venture built around Japan’s Daihatsu, and from 1994 it sold a compact car derived from the Daihatsu Mira. Perodua ended Proton’s near-monopoly, and over time the smaller-car specialist overtook its older sibling to become the market leader it remains.

Who owns Proton and Perodua now?

The ownership story is where the national-car idea meets globalisation. Proton passed from government hands to DRB-HICOM, a private conglomerate, in January 2012, when the state investment arm Khazanah Nasional sold its roughly 43% controlling stake for RM1.29 billion. Then in 2017, DRB-HICOM agreed to sell 49.9% of Proton’s equity to China’s Zhejiang Geely Holding Group: the definitive agreement was signed in June 2017 and the sale completed on 29 September 2017, for a total of RM460.3 million. Geely’s stake gave a Chinese carmaker its first serious foothold in Malaysia and, through shared platforms, revived Proton’s model line-up.

Perodua, meanwhile, kept its Japanese engineering roots through the Daihatsu partnership. The result is a curious balance: one “national” brand now anchored to a Chinese partner, the other to a Japanese one, both still counted as Malaysian makes for policy and market-share purposes.

In 2018 the government announced a Third National Car Project, appointing the Malaysian firm DreamEdge as anchor. It has not reshaped the market the way Proton and Perodua did.

How big is the industry today?

Malaysia’s car market is dominated by passenger cars, unlike most of ASEAN where commercial vehicles carry a larger share. In 2024 it reached record highs on both sales and production, helped by a resilient economy, an unemployment rate at a decade-low 3.2%, and a policy rate held at 3%. Sales then edged higher again in 2025, to an all-time high of 820,752 units (+0.5%), the second straight year above 800,000.

Measure (2024)	Figure	Change vs 2023
Total vehicle sales (TIV)	816,747 units	+2.1%
Passenger vehicles sold	747,180 units	+3.9%
Commercial vehicles sold	69,567 units	−13.8%
Total vehicles produced (TIP)	790,347 units	+2.0%
National-make share of TIV	62%	+2 pts
Electrified vehicle (xEV) sales	45,562 units (5.6% of TIV)	+19%

Source: Malaysian Automotive Association, Market Review 2024.

National makes rose to 62% of total industry volume, and within the passenger-car segment Proton and Perodua together held 67.7% (505,689 units). The commercial-vehicle drop was largely a policy side-effect: the removal of the diesel subsidy in June 2024 cut pick-up demand by about 16%.

The industry’s structural footprint is broader than the two brands. As of the 2015 manufacturing census, Malaysia counted 525 automotive parts companies employing roughly 49,677 people, on top of the vehicle assemblers themselves. That supplier ecosystem — not just the badges on the bonnet — is what the National Automotive Policy has always tried to protect and upgrade.

What does the National Automotive Policy actually do?

The NAP is the government’s periodic reset of the sector’s direction. It was first introduced in 2006, revised in 2009, and updated again as NAP 2014, each iteration building on the last. The current edition, NAP 2020, was launched on 21 February 2020 by Prime Minister Mahathir Mohamad at what is now the Ministry of Investment, Trade and Industry (MITI), as an enhancement of NAP 2014. Its language moved away from simply defending national cars toward technology: developing a Next Generation Vehicle (NxGV) ecosystem, expanding Mobility-as-a-Service (MaaS), and equipping suppliers with Industry 4.0 capabilities. It leans on a “customised incentive” mechanism that rewards investment value, supply-chain localisation, technology transfer, R&D and exports rather than blanket protection.

NAP 2020 is now itself under review. MITI has said a mid-term review would be delivered by the end of 2025 and, in August 2025, set up a Council of Automotive Eminent Persons (CAEP) to conduct it, addressing the shift from combustion engines to EVs and the wave of competition from Chinese imports. As of mid-2026, however, no revised NAP or final review outcome had been officially published or gazetted, and commentators were still urging MITI to update the policy. Officials have signalled that future policy will emphasise energy-efficiency standards applied across battery-electric, hybrid and range-extended vehicles, rather than picking a single propulsion technology — while stressing there is no plan to abolish excise duties on cars generally.

How are electric vehicles being pushed?

The blunt instrument is tax. To pull EV assembly onshore, the government structured the incentives to reward local production:

• Fully imported (CBU) EVs were exempt from import and excise duties until 31 December 2025. The Ministry of Finance confirmed in its Fiscal Outlook 2026 that this window was not extended, so from 1 January 2026 CBU EVs are dutiable again (typically 30%+10%+10%, or 5%+10%+10% for China-origin models under ACFTA).
• Locally assembled (CKD) EVs keep their exemptions until 31 December 2027, a two-year head start designed to make in-country assembly the cheaper long-term path.

The demand signal is already visible. Electrified vehicles (battery-EVs plus hybrids) reached 5.6% of the market in 2024, up from 4.8% a year earlier, at 45,562 units — split into 14,766 battery-EVs and 30,796 hybrids. Battery-EV sales alone jumped 45%, driven by new models and makes, particularly from China. The MAA expected EV demand to stay strong through 2025 precisely because the CBU exemption expired at year-end, creating a buy-now incentive.

The constraints are equally clear. The MAA flags limited charging bays outside the more developed states as a brake on wider adoption, and the coming petrol-subsidy rationalisation could reshape demand toward more efficient vehicles.

What’s next

The near-term calendar is defined by two deadlines. First, the CBU EV duty exemption lapsed at the end of 2025 and was not extended, a moment expected to compress a wave of imported-EV buying and then test whether local assembly picks up the slack before the CKD exemption ends in 2027. Second, the NAP 2020 mid-term review — launched under the CAEP but not delivered on its end-2025 target — will eventually set the rules that follow, likely built around energy-efficiency standards rather than a single technology.

For readers tracking Malaysia’s economy, the questions worth watching are whether the national makes can defend their combined 62% share as Chinese brands scale up, whether the 525-strong supplier base can retool for batteries and power electronics, and whether charging infrastructure spreads beyond the Klang Valley. This article is an AI-assisted draft; verify current duty rates and any post-review policy against the MITI, MOF and MAA sources before relying on them for a purchase or investment decision.