Chinese car brands rev up competition

CHINESE car manufacturers are rapidly expanding globally, making Malaysia’s automotive market highly competitive and a buyer’s haven.

Known for their knock-offs of major makes in the past, Chinese cars are becoming increasingly popular in local markets, especially in the electric mobility market, as they are sleek, modern and offer great value for money.

A friend who bought a BYD Sealion electric vehicle (EV) says it drives like a continental car and he has no regrets about it.

Once the companies increase their reach to smaller towns in Malaysia, the cars will gain greater acceptance.

Chery Automobile, Geely, SAIC GM Wuling Automobile Co and Great Wall Motor are planning assembly/production facilities in the country.

In some ways, it’s what Malaysia’s government wants – to attract original equipment manufacturers to localise their production.

The downside is that their aggressive commercialisation approach for market share has come at the cost of sales and margins for auto companies like Bermaz Auto Bhd (BAuto) and Sime Darby Bhd.

The share price of BAuto has dropped 71.6% to become a penny stock at 76 sen a share as Mazda’s market share has slipped due to intense competition.

Some 50 models are available in the RM100,000-RM150,000 segment where Mazda competes.

One industry executive says it’s hard to keep track of launches these day and prices keep changing as dealers offer various rebates, offers and discounts.

Sime Darby, which accounts for about half of the total industry volume (TIV) annually, has seen its valuation fall 38% over the past year to RM1.68 as its BMW franchise in China is facing fierce competition from Chinese makes there.

Toyota Vellfires and Alphards appear to have become the status symbols of luxury mobility in the country, taking market share from continental makes.

Perodua remains the vehicle of choice for entry level motoring. The proposed launch of its EV model later this year could provide some catalyst to Sime Darby and MBM Resources Bhd, which is down by 13% to RM4.61.

Industry whispers suggest a Chinese car maker could introduce a car priced below RM100,000 here by the end of the year.

This would take the battle for market share to the class B sedan range.

There will likely be little respite for local listed companies in the near future due to revisions in the sales and service tax (SST)and a potential fuel rationalisation exercise that could cause sales to fall and costs to rise.

The signs are already there. The Malaysian Automotive Association’s (MAA) data on passenger car sales for June reveals that passenger car sales for the first six months of 2025 (1H25) eased by 3% on-year to 347,084 due to various reasons including the base effect of the strong sales in 1H24.

The drop is not across the board. Digging deeper into the numbers, the MAA data shows EV sales, a stronghold of foreign makes, doubled to 12,733 units in 1H25 (6,651 in 1H24) while hybrid vehicle sales grew marginally from 15,891 units to 17,840 units. In total, hybrid and EV sales in the 1H25 rose 35.6% over 1H24.

The EV sale numbers could be higher as the data does not include data from non-members of MAA like Tesla or some of the Chinese car makers.

The higher sales of EVs is likely driven by demand for fully-imported models, which enjoy full import duty and excise duty exemption as well as road tax exemption until Dec 31, 2025.

Locally-assembled EVs, however, will still enjoy exemptions from excise duty and sales tax until the end of 2027.

The combined market share of the two national makes improved by 1% to 63% or 235,961 units, while non-national makes registered lower sales volume of 137,675 units or 7.9% on-year decline in 1H25.

Some feel the real test for Chinese manufacturers and their owners will come with time. Their cars have yet to prove as durable as legacy brands.

What if some of the Chinese companies decide after a few years the market here is not profitable enough and exit? Such a likelihood is very real.

Only a handful of over 150 Chinese automakers are said to be profitable. Consultancy firm AlixPartners forecasts only about 20 will be profitable by the end of this decade while the others will shut down, consolidate or live with niche market shares.

Most local buyers would also hope they hold some value in the used car market, especially the internal combustion engines and hybrids vehicles.

The exception would be EVs, which will be written off unless buyers wish to pay for a new battery.

The concerns maybe overstated but time will tell.

For now, the tariff war and restrictions to market access in certain markets will ensure Chinese automakers continue to build market share here and elsewhere through their aggressive brand-building measures.