China changes business gears

THE Malaysian automotive sector is seeing the entry of new dealer groups from China, following the growing dominance of Chinese marques in the market.

Instead of relying on Malaysian dealer groups to take their brands to consumers, some are now working with China-based dealership groups that are setting up their own retail networks in Malaysia.

The result is a new layer of competition for Malaysian dealers, which are now facing not just new vehicle brands, but also better-capitalised foreign dealership groups.

And the competition is also extending beyond the showroom, into workshops, parts and servicing, and other businesses that sit between the carmaker and the customer.

One of the clearest examples is China Harmony Auto Holding Ltd, which entered Malaysia in 2024 as an authorised BYD dealer, opening its first showroom at Hartamas Shopping Centre on June 26 that year.

Since then, the Hong Kong-listed group has expanded its Malaysian operations to BYD outlets in Plaza Arkadia, Skudai and Iskandar Puteri, as well as DENZA showrooms in Kuala Lumpur and Johor.

Its Malaysian operations are registered as Harmony New Energy Auto Service (Malaysia) Sdn Bhd, which is the authorised dealers for BYD and DENZA, operating six showrooms across Malaysia.

And Harmony Auto is not alone.

Nanling Auto Sales & Service (Malaysia) Sdn Bhd, a company linked to China-based Guangzhou Nanling Automobile Co Ltd, has also established operations here, with its XPENG Puchong Experience Centre opening in September.

The development comes as Malaysia seeks to encourage more vehicle production and investment locally.

Malaysia’s electric vehicle (EV) tax incentives began in 2022, with tax exemptions introduced for both imported completely built-up (CBU) EVs and locally assembled completely knocked-down (CKD) EVs.

The incentives for CBU EVs ended on Dec 31, 2025, while those for CKD EVs remain in place until Dec 31, 2027.

But industry players say the bigger gap is further downstream, and not at the manufacturing level.

They say the rules and incentives are largely focused on what happens to the vehicle before it reaches the showroom.

The question now is what happens once it gets there.

Traditionally, foreign carmakers entering Malaysia would appoint local companies to handle distribution and work with local dealers to sell and service their vehicles, one industry source says.

As the brand and sales volumes grew, the carmaker could eventually establish its own local operation and take control of distribution, while the retail business remained with local dealers.

But the latest development is different, the source says.

Some China-based dealership groups are now entering Malaysia directly and setting up or owning their own retail operations, he says.

“What is happening now is the dealer groups are coming directly from China and 100% own here,” the source tells StarBiz 7.

Industry estimates cited by the source put distributor margins at about 20% and dealer margins at around 12%, although actual margins vary by brand and business model.

“So, a good 30% to 35%,” the source says of the combined margin opportunity across distribution and retail.

The source says the competitive pressure from Chinese companies started with the products themselves, particularly EVs, as manufacturers benefited from scale, battery technology and vertically integrated supply chains.

“Most of the China EV cars, they’re all vertically integrated.

“The whole supply chain, they control everything from A to Z,” the source says.

China produced 34.53 million motor vehicles in 2025, compared with total industry volume of about 820,000 vehicles in Malaysia.

That huge production base gives Chinese automakers and suppliers access to large volumes and established supply chains, which can support both pricing and the wider automotive business, the source says.

And selling a car is only one part of that business.

Revenue can also come from servicing, spare parts, tyres, insurance and other after-sales activities.

This is where the Chinese presence is also growing.

China-based TUHU Car Inc, one of China’s largest independent automotive service chains, expanded into Malaysia in 2024.

The company had 8,825 workshops in its network as at end-June, almost all of that in China, according to its latest corporate disclosures.

Nearly all operate under franchise arrangements and are supported by TUHU’s distribution network in China.

In Malaysia, TUHU has built a network of 11 workshops across the Klang Valley.

Its wider franchise network is supported by 31 regional distribution centres and 738 local distribution centres in China.

Unlike a carmaker, TUHU does not depend on any one vehicle brand.

Its business covers servicing, tyres, parts and other maintenance needs across different marques.

That gives it access to the wider pool of vehicles on Malaysian roads, rather than only customers buying a particular Chinese marque.

An industry source says the model could appeal to cost-conscious consumers because companies can use their scale and China-based supply chains to offer lower prices.

The source added that while local mechanics may handle the work, much of the system and parts supply can still be linked to China.

“They hire young local mechanics.

“But the whole application, the whole supply chain is from China. Every part comes from China,” he says.

The development comes as economic ties between China and Asean deepen.

The Asean-China Free Trade Area 3.0 upgrade protocol was signed in Kuala Lumpur on Oct 28, 2025, expanding cooperation into areas including the digital economy, green economy, supply-chain connectivity, competition and consumer protection.

While the agreement does not specifically govern automotive retail, it reflects the broader trade and supply-chain links between China and Asean.

For Malaysia’s automotive industry, the shift is therefore happening on more than one level.

Chinese automakers first challenged the market through their vehicles, particularly EVs.

Now, Chinese companies are also moving deeper into the businesses built around those vehicles, from retail and distribution to servicing and parts.

For Malaysian dealers, the question is no longer simply whether Chinese brands can win Malaysian buyers.

It is whether Chinese companies will also capture a larger share of the businesses built around those cars.