Malaysia's EV Market Set for Intensifying Competition Amid Policy Shifts

The automotive industry is approaching a structural inflection point with key policy shifts expected within the next six months. Competition in the electric vehicle space is intensifying, and the government needs to decide whether to end the completely-built-up EV import tax exemptions and Approved Permit regime by year-end. Companies with strong exposure to electrification, efficient sourcing structures, and high local content will be best positioned to navigate the transition. BIMB Securities Research retains a "neutral" stand on the sector with a positive bias, favouring original equipment manufacturers aligned with themes of affordability, EV adoption, and localisation.

The U.S. electric vehicle (EV) industry is at a critical juncture, with President Donald Trump's 2024 infrastructure and industrial policy poised to reshape the sector significantly. The executive order titled "Unleashing American Energy: Presidential Actions" is set to deregulate EV-focused regulations, impose tariffs on foreign-made vehicles, and promote domestic manufacturing [1]. These policy shifts are expected to impact the EV market, particularly for companies like Tesla, which finds itself in a unique position.

Policy Playbook: Deregulation, Tariffs, and Energy Independence

Trump's infrastructure agenda is built on three pillars: deregulation, energy dominance, and industrial protectionism. Key regulatory changes include:
- Eliminating the EV mandate, which forced automakers to meet emissions targets favoring electric vehicles.
- Suspending federal funding for EV charging infrastructure under the Inflation Reduction Act.
- Rolling back emissions standards to 2019 levels, allowing more gas-powered vehicles.
- Blocking California's authority to set stricter emissions standards, potentially halting the state's 2035 EV transition timeline.
- Imposing 25% tariffs on imported EVs, a direct blow to foreign automakers but a mixed blessing for Tesla [1].

These policies signal a strategic pivot away from climate-driven regulations toward a fossil-fuel-centric energy strategy. The goal is to reduce reliance on foreign energy, revive domestic manufacturing, and protect American automakers from global competition.

Tesla's Position: Domestic Production vs. Global Supply Chain Risks

Tesla's survival in this new landscape hinges on its domestic production model. Unlike competitors like Ford's Mustang Mach-E (assembled in Mexico) or Hyundai's Ioniq 5 (produced in South Korea), Tesla's Model 3 and Model Y are built in the U.S. with 70% of components sourced domestically or from Canada. This high U.S. content shields Tesla from the full brunt of Trump's 25% tariffs [1].

However, Tesla is not immune to the policy's ripple effects. The company still relies on foreign-sourced components for 30-40% of its vehicles, including batteries and critical minerals. Trump's proposed Section 232 tariffs on EV supply chain components and export restrictions on EV battery technology could disrupt Tesla's access to global markets. Additionally, the phaseout of Biden-era EV tax credits (which provided $7,500 per vehicle) will likely reduce consumer demand, particularly in price-sensitive markets [1].

Investor Sentiment: A Tale of Two Realities

The market's reaction to Trump's policies has been volatile. Tesla's stock fell 6% in July 2025 following Elon Musk's announcement of his political party, the "America Party," reigniting concerns about his distraction from core business operations. Meanwhile, the broader EV sector has seen a 21% decline year-to-date, with Chinese automakers like BYD gaining market share in Europe and the U.S. [1].

Yet, some analysts argue Tesla is well-positioned to outperform. Its domestic production model, vertical integration, and brand loyalty provide a buffer against the policy headwinds. The key question is whether Tesla can leverage Trump's protectionist policies to expand its U.S. market share while mitigating the risks of retaliatory tariffs from trading partners like China and the EU [1].

Geopolitical and Economic Risks

Trump's tariffs are not just about protecting U.S. automakers—they're a geopolitical gambit. By targeting countries aligning with the "Anti-American policies of BRICS" (Brazil, Russia, India, China), the administration is escalating trade tensions. This could lead to retaliatory tariffs on U.S. exports, including agricultural products and tech goods, which would indirectly hurt Tesla's international operations [1].

For example, China—a key market for Tesla—sold 657,000 vehicles in 2024. If Beijing imposes retaliatory tariffs on U.S. EVs, Tesla's ability to scale in Asia could be crippled. Similarly, European markets, where Tesla has seen a 76% sales drop in Germany, may push back against Trump's energy policies through the EU's own EV subsidies and carbon tariffs [1].

Investment Advice: Navigating the New Normal

For investors, the EV sector is now a high-risk, high-reward proposition. Here's how to position your portfolio:
1. Hedge Against Policy Uncertainty: Diversify across traditional automakers (e.g., GM, Ford) and EVs (e.g., Tesla, Rivian).
2. Focus on Domestic Supply Chains: Invest in U.S. battery manufacturers and critical mineral producers (e.g., Lithium Americas, Albemarle).
3. Monitor Geopolitical Tensions: Track developments in China-EU-U.S. trade relations.
4. Watch Tesla's Execution: The company's ability to maintain production efficiency, reduce costs, and expand into untapped markets (e.g., India, Southeast Asia) will determine its resilience [1].

Conclusion: A New Era for EV Investing

Trump's 2024 infrastructure policy is a seismic shift for the EV industry. While Tesla's domestic production model offers a buffer, the broader policy environment—tariffs, deregulation, and geopolitical risks—creates a fragmented playing field. For investors, the key is to balance short-term gains with long-term resilience. The EV market may be battered, but it's far from broken. As always, adaptability will be the hallmark of success in this new era.

References:
[1] https://www.ainvest.com/news/trump-2024-policy-shift-game-changer-tesla-ev-market-2507/
[2] https://www.globenewswire.com/news-release/2025/07/17/3117491/28124/en/Electric-Vehicle-and-Charging-Infrastructure-Global-Market-Report-2025-2029-with-50-KPIs-Across-20-Countries.html