For decades, Malaysian auto giants Proton and Perodua have thrived within the confines of their domestic market (estimated total industry volume of around 700,000 units in 2024).  This limited their resources and R&D budgets, hindering competition with global giants in complex automotive technologies. However, the global shift towards electric vehicles (EVs) presents a fascinating plot twist.

The traditional automotive landscape, dominated by established carmakers and their intricate internal combustion engine (ICE) technology, is undergoing a dramatic transformation. EVs, with their simpler architecture and reliance on readily available electronic components, offer a more level playing field. Here, the limitations that once confined Proton and Perodua might just become their unexpected advantage.

This unexpected opportunity lies in the very essence of EVs. Unlike the complex world of ICEs, EVs are more modular and rely heavily on established technologies from the electronics industry. This shift in focus opens doors for smaller, nimble players like Proton and Perodua to potentially leapfrog established automakers in the race to EV dominance.

By strategically adapting their approach and focusing on rapid optimization for BEVs, Proton and Perodua have a chance to rewrite their story. This revised approach hinges on two key factors: shedding the baggage of legacy ICE technology and embracing the modularity of the EV platform.

Proton, for example, is adopting a two-pronged strategy. They’ll leverage Geely’s technology for a quick market entry with the e-Mas based on the Geely Galaxy E5. Simultaneously, they’re developing the Global Modular Architecture (GMA) platform for future Proton EVs, potentially offering more affordable models tailored for Southeast Asia.

Perodua, traditionally reliant on Daihatsu and Toyota, finds itself venturing into independent EV development for the first time. This bold move presents both challenges and opportunities: achieving technological independence, creating market-specific innovations, and potentially enhancing their brand image. However, the project requires substantial investment in R&D and talent acquisition.

Malaysian Auto Industry’s EV Gambit: Proton and Perodua Forge Unique Paths in Southeast Asia’s Evolving Market

The Malaysian automotive industry stands at a crucial juncture as it navigates the global shift towards electrification. Recent developments at both Proton and Perodua highlight the unique challenges and opportunities facing Southeast Asian automakers in the EV era, especially as Chinese brands aggressively expand into the region.

According to a report by Counterpoint Research, Southeast Asia experienced the highest year-on-year growth in EV sales globally in 2023, at a staggering 894 percent. An EY-Parthenon analysis expects the ASEAN-6 (Indonesia, Thailand, Malaysia, Singapore, Vietnam, and the Philippines) EV market to record a compound annual growth rate (CAGR) of 16%–39% between 2021 and 2035. This translates to potential annual sales opportunities reaching a whopping US$80 billion–US$100 billion by 2035, up from around US$2 billion in 2021.

Dominant Players in Malaysia

Proton and Perodua have been the dominant forces in the Malaysian automotive industry for decades. Proton, established in 1983, enjoys strong brand recognition as the national carmaker. They have historically held a significant market share, currently estimated to be around 19% (as of June 2024). Perodua, known for its affordable and reliable vehicles, boasts an even larger market share in Malaysia, estimated to be around 48%. Their strong brand reputation and focus on value for money have secured their position as a household name in the region.

Limited Resources, Unexpected Opportunity

Traditionally, Proton and Perodua have operated within the constraints of a relatively small domestic market (estimated total industry volume of around 700,000 units in 2024). This limited their R&D budgets and restricted their ability to invest heavily in homegrown technologies. However, the global shift towards electrification presents a surprising opportunity.

The EV landscape is currently in a state of flux. Unlike traditional gasoline vehicles with complex powertrains, EVs have a simpler architecture and rely more on readily available components from the electronics industry. This modularity levels the playing field for smaller carmakers like Proton and Perodua.

Embracing Change: A Stepping Stone to Global Relevance

The transition to EVs forces both companies to embrace a new development paradigm. By focusing on rapid optimization for BEVs and shedding the baggage of legacy internal combustion engine (ICE) technology, Proton and Perodua have the chance to leapfrog established automakers.

This shift requires a strategic move away from developing proprietary powertrains, a common practice in the old guard of the automotive industry. Partnering with established battery manufacturers and technology providers can accelerate development and reduce costs for Proton and Perodua.

Success Hinges on Speed and Adaptability

While the playing field is more even in the EV arena, success won’t be guaranteed. Proton and Perodua’s ability to adapt quickly and optimize their operations for BEV production will be paramount. They need to:

Prioritize R&D: Focus on developing features and technologies specifically suited to Southeast Asian markets, like heat management systems or range extension solutions to address limitations in charging infrastructure.

Forge Strategic Partnerships: Collaborate with battery manufacturers, fast-charging technology providers, and other relevant players to shorten development cycles and ensure access to cutting-edge components.

Embrace Open Standards: Move away from proprietary powertrain development and leverage the modularity of EV platforms to their advantage.

Beyond Malaysia: A Broader Impact

The success of Proton and Perodua’s EV ventures could extend far beyond Malaysia. Their ability to develop affordable and market-specific EVs could pave the way for other emerging markets seeking cost-effective and practical electric mobility solutions.

Furthermore, their experience in tropical climates positions them uniquely. By designing EVs that function efficiently under heat and humidity, they can cater to a wider range of markets with similar environmental conditions.

Proton’s Dual Approach to Electrification

Proton’s EV strategy is more nuanced than initially predicted by industry watchers. The national carmaker is adopting a two-pronged approach:

Leveraging Geely’s Technology: Proton’s first e.Mas branded EV is likely to be based on the Geely Galaxy E5. This move allows Proton to quickly enter the EV market with a proven platform, benefiting from Geely’s advanced technology and experience.

Developing Indigenous Solutions: Simultaneously, Proton is working on its Global Modular Architecture (GMA). This platform is set to underpin future Proton-developed EVs, potentially including more affordable, entry-level models. The GMA’s significance lies in allowing Proton to create a platform specifically tailored for Southeast Asian conditions, potentially reducing reliance on future technology licensing and giving them more control over vehicle design and features.

This dual strategy could prove advantageous. By utilizing Geely’s existing technology, Proton can establish a presence in the EV market relatively quickly. Meanwhile, the development of the GMA platform allows Proton to tailor vehicles specifically for Southeast Asian markets and potentially create exportable models for other emerging markets.

Perodua’s Bold Independent Venture

Perodua, traditionally reliant on technology from Daihatsu and Toyota, finds itself in an unexpected position. With its Japanese partners currently not offering compact BEVs, Perodua is embarking on an unprecedented journey of independent EV development.

This situation presents both challenges and opportunities:

Technological Independence: For the first time, Perodua is designing a car entirely on its own, seeking industry experts to assist in this significant undertaking.

Market-Specific Innovation: This independence allows Perodua to create an EV tailored specifically to Southeast Asian needs and preferences.

Brand Evolution: Success in this venture could dramatically enhance Perodua’s brand image, positioning it as an innovator in the region.

Resource Intensiveness: The project will require substantial investment in R&D and talent acquisition.

The exact investment amount for Perodua’s independent EV development is yet to be disclosed. However, the project itself represents a significant undertaking for the company, requiring substantial resources in R&D and talent acquisition. The success of this venture could redefine Perodua’s position in the industry, establishing them as a leader in EV innovation for Southeast Asia.

Implications for the Southeast Asian Market

The divergent approaches of Proton and Perodua highlight the complex challenges facing Southeast Asian automakers:

Filling the Entry-Level EV Gap: Both companies have the opportunity to develop affordable EVs, a segment currently underserved globally. Success here could give them a significant advantage, not just in Malaysia but in other emerging markets.

Balancing Speed to Market and Local Relevance: Proton’s strategy of using both partner technology and in-house development balances the need for quick market entry with long-term technological independence.

Navigating Partnerships: Perodua’s situation underscores the risks of over-reliance on technology partners and the potential need for diversification.

Competition with Chinese Brands: Both companies must innovate to compete with the influx of Chinese EVs, known for their advanced technology and competitive pricing. Here, Proton’s experience with Geely’s technology could prove valuable, allowing them to bridge the gap. Perodua’s focus on market-specific needs might give them an edge in understanding Southeast Asian consumer preferences.

Strategies for Success

For Proton, Perodua, and other Southeast Asian automakers to succeed in this evolving landscape, they should consider:

Focused R&D Investment: Prioritize developing technologies and features specifically relevant to Southeast Asian markets. This could include heat management systems for tropical climates, or features catering to infrastructure limitations like extended range or innovative charging solutions.

Strategic Partnerships: While pursuing independence, selective collaborations can accelerate development and reduce costs. Partnering with battery manufacturers or technology providers specializing in areas like fast charging could be beneficial.

Government Collaboration: Work closely with authorities to develop supportive policies, incentives, and infrastructure. This could involve extending tax breaks for EVs, investing in charging infrastructure development, or streamlining EV registration processes.

Export-Oriented Design: Create EVs with the potential for success in other emerging markets, expanding beyond Southeast Asia. By considering factors like road conditions, driving styles, and regional regulations during the design phase, they can develop vehicles with broader appeal.

Consumer Education: Invest in programs to familiarize Southeast Asian consumers with EV technology and benefits. This can involve educational campaigns, test drive events, and partnerships with dealerships to address consumer concerns about range anxiety and charging infrastructure.

Consumer Considerations and Government Initiatives

While charging infrastructure is expanding, its growth might not match the rapid increase in EV sales in the short term. However, this may not be a critical hurdle yet, considering Malaysia’s early EV adoption stage. As of 2023, BEVs only hold a 3% market share, indicating a technology adoption curve still in its early stages.

The recent government decision to partially remove diesel subsidies is a positive step. This, along with existing policies like total import and excise duty exemptions for EVs until 2025 (with a potential extension), could encourage consumers to explore more energy-efficient options, including hybrids, PHEVs, and BEVs.

The Broader Context

This situation in Malaysia mirrors challenges faced by automakers in other emerging markets. The success or failure of Proton and Perodua in their EV ventures could provide valuable lessons for companies in similar positions globally. Moreover, their ability to develop affordable, market-specific EVs could have far-reaching implications. If successful, they could not only secure their positions in Southeast Asia but also become significant players in the global race to produce accessible electric vehicles.

Potential for Wider Success

A successful entry-level BEV from Proton or Perodua could mark a turning point, not just for the Malaysian market but for Southeast Asia (SEA) as a whole. Developing economies in the region constantly seek affordable and reliable transportation. EVs designed by Proton and Perodua, with their focus on value and potentially lower costs, could be a perfect fit for these markets, catering specifically to budget and practical needs.

Being the only carmakers in the world with extensive experience in tropical climates gives Proton and Perodua a unique edge. Their engineers understand the challenges posed by heat, humidity, and other tropical conditions. This expertise can be instrumental in developing EVs that function efficiently and reliably in similar environments across Southeast Asia and beyond.

As more countries prioritize cleaner air and energy efficiency, the demand for EVs is bound to rise globally. Proton and Perodua’s success in this arena could propel them to become major exporters of affordable and climate-friendly electric vehicles, catering to a vast and rapidly growing market.

Conclusion

The limitations of their domestic market may have inadvertently prepared Proton and Perodua for the EV revolution. Their agility and lack of legacy baggage in traditional ICE technology could be an unexpected advantage. By embracing change, strategically adapting their approach, and focusing on Southeast Asian needs, these Malaysian carmakers have a unique opportunity to not only secure their futures but potentially become significant players in the global shift towards electric mobility.

The contrasting approaches of Proton and Perodua in tackling the EV challenge reflect the broader complexities facing the automotive industry in Southeast Asia. As Chinese brands continue their aggressive expansion and global giants struggle to provide suitable solutions for emerging markets, local players have a unique opportunity to innovate and lead.

The coming years will be critical for both Proton and Perodua. Their ability to successfully develop and market EVs that meet local needs while remaining competitive on a global stage will not only shape their own futures but could also redefine the role of Southeast Asian automakers in the global automotive landscape. As the industry watches closely, the strategies employed by these Malaysian companies may well provide a blueprint for other emerging market automakers navigating the electric transition.