Malaysia's automotive industry has become an interesting battleground between Japan and China, two of the world's great carmaking powers. And the contest is being played out through our national carmakers, Proton and Perodua.
Proton has the backing of Zhejiang Geely, one of China's most technologically advanced automotive groups while Perodua has the support of Daihatsu and, behind it, the industrial might of Toyota.
Both partnerships have been successful, but the arrival of electric vehicles (EV) has changed the rules of the game.
China has taken a commanding lead in EV technology, battery production and manufacturing costs. Japan, despite its dominance of the global automotive industry for decades, has been more cautious about committing itself to battery electric vehicles beyond hybrids.
That puts Perodua in a particularly interesting position.
An important insight into Japan's intentions came in May when its ambassador to Malaysia, Noriyuki Shikata, described Perodua as one of the best examples of a successful Japanese-Malaysian joint venture. More significantly, he disclosed that Japan's economy, trade and industry ministry had decided to extend financial support for a new Perodua-led project.
Shikata also observed that Perodua was entering a new stage of innovation, developing solutions in Malaysia that Japan itself was interested in learning about.
Now, that is an interesting statement coming from the representative of one of the world's most sophisticated automotive nations. For more than three decades in the auto industry, we have regarded the Japanese as the teachers and Malaysians as the students.
Could the relationship now be evolving into something more equal?
From petrol to electric
Consider what Perodua has achieved.
Starting with the modest Kancil in 1994, it has grown into Malaysia's largest carmaker, commanding roughly 40% of our domestic market. Its success was built on affordable, reliable petrol-engine cars, efficient manufacturing and a formidable local supplier network.
The question is whether Perodua can translate these strengths into the electric age.
Its first home-grown EV, the QV-E, represents a bold but expensive undertaking. Unlike Proton, which can draw upon Geely's existing EV platforms and economies of scale, Perodua has invested heavily in developing its own product.
The difference is fundamental. Proton benefits from China's enormous EV ecosystem. Perodua is attempting to develop Malaysian engineering capabilities while building a new supply chain.
Market reception
The QV-E encountered a difficult market reception, with pricing and battery leasing arrangements initially raising questions among buyers. Subsequent price reductions have made it more competitive, but they also illustrate the formidable economics of EV manufacturing.
This is where government policy becomes important. Should Malaysia provide targeted financial assistance to Perodua to develop its EV capabilities?
I believe there is a strong case for doing so, provided the assistance is directed towards research, engineering, local components and technology development rather than simply subsidising car prices as China did for 5 years
There is an even stronger argument if Japan is prepared to participate. Toyota and Daihatsu possess enormous experience in manufacturing efficiency, quality control and supplier development. Combining these strengths with Perodua's local engineering ambitions could create something genuinely valuable.
It would also give Japan an opportunity to develop affordable EV technologies for Asean markets, where price sensitivity remains a major consideration.
Supply chains
We should not overlook that China already enjoys significant advantages in battery technology and scale. Perodua's QV-E itself uses batteries from China's CATL, among the world's biggest maker of EV batteries.
The modern automotive industry depends on international supply chains.
The objective should not be to manufacture every component in Malaysia. It should be to develop technologies and industrial capabilities in which Malaysians can become genuinely competitive.
Nor should this become another exercise in protecting a national carmaker from competition. The government must insist on measurable results, greater localisation, export potential and meaningful Malaysian intellectual property.
Green technology
The transition towards EVs should not be measured solely by the number of electric vehicles sold. The environmental impact of automotive manufacturing, energy consumption, battery production, material sourcing and recycling must also be considered.
Government R&D assistance should therefore include the development and adoption of green technologies and cleaner manufacturing processes throughout Malaysia's automotive industry.
This could include energy-efficient production systems, AI-based energy optimisation, battery recycling, resource efficiency and technologies that reduce industrial emissions.
Such initiatives would not only support environmental sustainability but also improve the competitiveness of Malaysian automotive suppliers in international markets.
Measurable benefits
A proper mechanism should be established to assess the actual national benefits generated by government R&D assistance. Malaysia's New Incentive Framework, introduced in 2026, already moves towards linking investment incentives with measurable economic outcomes.
Rather than creating overlapping subsidy schemes, the government should examine how existing mechanisms can be strengthened and better coordinated to support automotive AI, strategic R&D and green industrial development.
The Japanese ambassador's remarks suggest that Japan sees something worth supporting in Perodua. Malaysia should recognise the opportunity.
Rather than viewing Proton and Perodua simply as two national carmakers competing for domestic sales, perhaps we should see them as two different pathways into the future of automotive manufacturing.
One draws upon China's extraordinary scale and speed. The other could build upon Japan's engineering discipline and Malaysia's own industrial experience.
If both succeed, Malaysia will be the winner. And the one which exports the most is the champion.
Yamin Vong is on Facebook at yamin.com.my, and can be contacted at yamin.vong@gmail.com.
The views expressed are those of the writer and do not necessarily reflect those of FMT.