Malaysian national carmaker Proton’s long-awaited electric vehicle (EV), the e.Mas7, was launched in December 2024. Priced between RM105,800 (US$23,950) and RM119,800 (US$27,120), the e.Mas7 is far more expensive than the country’s bestselling internal combustion engine (ICE) car, the Perodua Bezza, which sold at just under RM50,000 (US$11,320) in 2024. Proton’s new EV will initially be imported as a Completely-Built-Up (CBU), or ready-to-drive unit, from its partner Geely’s factory in China as the new dedicated EV manufacturing plant in Tanjung Malim, Malaysia will be operational only by the end of 2025.
New supply chains are also being worked out. With fewer mechanical parts, EV production does not use various segments of the old supply chain for ICE automobiles. But EV components will be far more complex, requiring new batteries, additional semiconductors, and advanced electronic components to support the expected increase in functionalities.
To facilitate the development of new EV component supply chains, Proton arranged a business match-making event in July 2024 at the Geely Research Centre at Hangzhou Bay, China, so that Proton’s existing Malaysia-based suppliers could interact with Geely’s EV suppliers. Local component producers will need new equity and technology partners to supply inputs for the new EVs and New Energy Vehicles (NEVs) that will shape Proton’s future.
The market for EV components is an example of derived demand: expansion of the new supply chain depends on growth in EV automobile sales. Assuming the continuing expansion of Malaysia’s charging infrastructure, local demand for EVs will likely pick up when prices come down. This could transpire from 2026, when Malaysia starts to receive imports of Completely-Knocked-Down (CKD) kits — car parts manufactured abroad for locally assembled vehicles. But it is unlikely that EV prices will reach the affordable range as benchmarked by Perodua’s bestselling ICE model.
EV supply chains will also depend on exports since the domestic car market is too small to provide the economies of scale needed to lower production costs in the highly competitive global automobile market. Without scale, Malaysian suppliers will struggle to reach the cost-effectiveness of Chinese competitors. Proton reportedly plans to export the e.Mas7 to Mauritius, Nepal, Singapore, Trinidad and Tobago, and Brunei.
In the case of Malaysia, the old supply chain for ICE models can still be maintained as long as the demand for ICE cars persists.
Generally, the transition to EVs implies that some existing component suppliers will face extinction if they do not reinvent themselves since major systems essential to ICE vehicles are absent from EVs. Thus, as the demand for EVs picks up, suppliers of exhaust systems, fuel systems, and transmissions may be forced to exit the industry.
However, in the case of Malaysia, the old supply chain for ICE models can still be maintained as long as the demand for ICE cars persists. Geely’s partnership with Proton since 2017 has led to the entry of new models, or what is known as the X-series, such as X70, X50, X 90, while preserving the legacy series (Persona, Iriz, Exora, Saga). These new models do not compete with the old ones, as they belong to a superior engine class. The new models are priced from around RM80,000 (US$18,110) to slightly above RM100,000 (US$22,640), while the best-selling Proton model in 2024 is the Proton Saga, which is priced at under RM50,000 (US$11,320).
Local demand for the legacy models will continue despite the government’s aspired shift to EVs, since affordable EVs under RM50,000 are still unavailable. The expected price of Perodua’s impending EV this year is RM80,000 (US$18,110) without the battery, which will be leased to the buyer. The announced removal of fuel subsidies may not lead to a shift to EVs either, since the subsidy will be maintained for lower-income households. If the form of fuel subsidy allows these consumers to continue using fossil fuel, then the demand for the legacy models (as well as some Perodua models under the same price segments) will most probably continue. Moreover, a recent survey indicated that 40 per cent of consumers still prefer ICE, while 20 per cent prefer hybrid cars. Malaysian consumers are, by and large, still cautious about EV adoption.
Since 2020, Proton has also been pushing hard to export its ICE cars, including the X-series models, to Kenya, Mauritius, South Africa, Pakistan, Brunei, Bangladesh, and Egypt. In fact, local assembly operations have already started in some export destinations like Kenya in 2020, Pakistan in 2021, and Egypt in 2024. To support the planned exports, including CKD kits for Proton’s assembly plants in export destinations like Bangladesh, Proton invested in a new high-tech engine assembly line in 2023. The facility is the first to assemble Geely’s 1.5 TGDI (Turbo Gasoline Direct Injection) engine outside of China, and can produce 180,000 units a year. This Malaysia-made TGDI powers Proton’s X70 and X90 models destined for overseas markets. Proton’s RM1.8 billion (US$410 million) investment to upgrade its Tanjung Malim plant and spur local manufacturing of engines indicates that the company does not expect global demand for ICE cars to vanish in the near or even distant future.
Proton’s inaugural EV will spawn new supply chains with China’s suppliers and their collaborations with local vendors. The pace of change, though, will depend on EV prices and charging infrastructure, and the presence of the old supply chain, in which Proton remains heavily invested, will endure.
Tham Siew Yean is a visiting senior fellow with the ISEAS – Yusof Ishak Institute, and Professor Emeritus, Universiti Kebangsaan Malaysia.
This article was first published on Fulcrum, ISEAS – Yusof Ishak Institute’s blogsite.
