Steering through automotive supply chain shifts: Malaysia's resilience in a volatile world
A global financial crisis, and several regional ones. Pandemics and epidemics – one of which brought economies to a standstill. Major geopolitical conflicts, each with deep humanitarian costs.
What used to feel like rare events are now reminders that volatility has become our era's default setting.
The past few years have taught us a hard truth: The world is no longer predictable. What once were isolated incidences, are now sustained events that reveal how deeply interconnected – and exposed – our global systems have become.
Few industries reveal this truth more starkly than the automotive sector.
In Malaysia, this reality came into sharp focus for the automotive industry. Long considered a stable contributor to our gross domestic product (GDP) and a core part of the Asean ecosystem, the sector has had to rewire how it thinks about resilience, localisation, and its place in an increasingly fragmented global economy.
An industry interwoven with the world
Automotive manufacturing has always relied on a cross-border choreography – one in which a component made in Vietnam is shipped to Thailand, paired with software from Japan, and finally assembled in Malaysia.
The efficiency was remarkable. But when just one point fails, the entire system falters.
Malaysia's automotive players have felt these ripples firsthand. Not from direct tariffs or embargoes, but from the shifting strategies of global suppliers and logistics networks.
Suddenly, questions that were rarely considered – 'What if a key supplier halts operations?' – have moved to the centre of boardroom conversations.
Shifting from cost to continuity
Where once the goal was to lower cost, today it's to lower risk. The automotive sector is beginning to pivot: exploring dual sourcing, reshoring critical parts, and embracing more regionalised models of supply.
Supply chain resilience is no longer a 'nice-to-have' – it's a prerequisite.
To support this shift, Malaysia's National Automotive Policy (NAP 2020) has laid important groundwork.
It emphasises the development of a competitive and sustainable automotive industry by encouraging local component manufacturing, promoting technological advancements, and enhancing supply chain resilience.
These include incentives for investment in local research and development (R&D), along with the adoption of Industry 4.0 technologies to improve efficiency and visibility across the supply chain. But policies take time to mature. Real progress hinges on execution.
Three Paths to Resilience
1. Regional sourcing and collaboration.
By tapping deeper into Asean's collective strength, under the Asean Free Trade Area (AFTA), Malaysian players can reduce exposure to distant disruptions.
Shared production hubs, aligned quality standards, and streamlined cross-border trade offer practical ways to secure supply while boosting regional competitiveness.
2. Technology for transparency.
More manufacturers are adopting predictive analytics and digital twins to model supply risks before they happen. What used to be a black box – the logistics chain – is becoming a dashboard, allowing for more informed, faster decisions.
3. Redefining local content.
Localisation must now mean more than assembly. It means R&D, process innovation, and skilled labour development – all tailored to Malaysia's unique position.
That's how we move from being an assembly hub to a knowledge and capability hub.
Tariff war begins
The imposition of tariffs by the United States under the current administration took many by surprise.
While Malaysia's automotive exports to the United States are limited, the tariffs have a ripple effect across the global economy.
A disruption at a single tier-one supplier in one country could have cascading effects down the supply chain, halting production lines thousands of miles away.
Increased raw material and component costs, along with future uncertainties in trade relationships, will force manufacturers to revisit sourcing strategies and address vulnerabilities in the supply chain.
Manufacturers want stability and predictability.
More than low-cost sourcing, they seek partnerships with countries that offer sound policies, stable economics, and favourable tariff structures.
Tariffs also affect adjacent industries – steel, composites, electronics, telecommunications – all of which feed into automotive manufacturing.
Malaysia's manufacturers are still reliant on imported components, and that impacts both local assembly and export competitiveness.
Building an adaptive industry
So, what are we doing as an industry and economy to mitigate these shifts?
Firstly, supply chain diversification.
Manufacturers are actively seeking alternative suppliers in different regions to reduce single-source dependencies.
This includes greater exploration of intra-Asean partnerships and new emerging markets.
Secondly, digitalisation.
The Covid-19 pandemic accelerated the adoption of real-time tracking, predictive analytics, and supply chain modelling.
These tools help automotive companies gain visibility, anticipate disruptions, and respond more effectively.
And thirdly, renewed focus on localisation.
Government incentives are encouraging both foreign and domestic investments in component manufacturing.
This reduces import reliance, creates local jobs, and strengthens the resilience of our export capacity.
Talent, innovation and collaboration
Localisation will further require, to future proof the transition, a robust talent pipeline.
From R&D and manufacturing to after-sales service, human capital is key.
Malaysia has long invested in technical and vocational education, and partnerships with automakers ensure that this ecosystem evolves in tandem with industry needs.
We are home to a number of tertiary and vocational training institutes, many of which have allied with global manufacturers to generate a steady stream of talent.
Localisation must be innovation-driven. It's not about replicating global models, but adapting them to our local strengths.
Setting up at pace, scaling responsibly, and embedding quality – these are the new imperatives, and serve as encouragement to invest in increasing local content in locally assembled products.
As a member of Asean, Malaysia sits within a regional automotive ecosystem, where our neighbouring countries compete with us to attract manufacturing and investment opportunities. But as the globalisation banner makes way for regionalisation, this opens up a slew of opportunities for collaboration.
In complex automotive assemblies, such as a car dashboard, components may come from several countries, so having ease of trading and logistics between partner countries can save time and cost, shared growth leads to shared resilience, benefiting local industries.
Conclusion
Malaysia's automotive sector is already one of the most developed in Asean.
It contributes 4% to GDP and supports over 700,000 jobs. We have one of the highest vehicle populations in the region – and we are not standing still.
The disruptions we face are global. But our response must be local, regional, and forward- looking. The future of mobility depends not only on what we build – but how we build it, and who we build it with.
In this, Malaysia is not just participating in the conversation – we're helping shape the next chapter.
The views expressed here are the writer's own.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Malay Mail
2 hours ago
- Malay Mail
Malaysia's subsidy blind spot: Why permanent resident spouses pay taxes but continue to miss out — Family Frontiers
JULY 30 — YAB Datuk Seri Anwar Ibrahim, the Malaysian Cabinet, and Members of Parliament, This letter is in response to the announcement by Malaysian Prime Minister and Finance Minister, YAB Dauk Seri Anwar Ibrahim, on July 23, 2025 regarding his initiatives to lower the cost of living in Malaysia, outlining a series of measures aimed at alleviating the rising cost of living. We commend the government's commitment to supporting the rakyat and easing their burden, particularly through initiatives such as the one-off RM100 payment under the Sumbangan Asas Rahmah (SARA) programme, the expansion of Jualan Rahmah Madani, the decision to maintain existing toll rates, and the reduction in RON95 petrol prices. These efforts will certainly bring relief to many Malaysian families. However, we respectfully wish to highlight the exclusion of an often overlooked group: permanent residents (PRs) who are spouses of Malaysians. These individuals have quietly and consistently contributed to the nation's growth — economically, socially, and culturally — while raising their families and building their lives here. While Malaysians will only pay RM1.99 per litre for RON95 petrol, non-citizens, including PR spouses, have to pay RM2.50 per litre or more. This scenario is likely to unfold very soon: non-citizen parents of Malaysian children will bear higher fuel costs as they travel to drop off and pick up their Malaysian children from school, tuition classes, or hospital appointments, disproportionately impacting middle- and lower-income families where every RM counts. This also leads to higher out-of-pocket expenses for Malaysian binational families, which could be directed to the advancement of Malaysian children in these families. For example, reduced funds for extra-curricular activities, tuition, or even better-quality educational resources. The financial pressures faced by PRs are also set to increase with the recent 6 per cent Sales and Services Tax (SST) charged on non-citizens, effective 1 July, amplifying an already unequal system. While the SST revision impacts all consumers, there are a few exceptions where non-citizens are subjected to 6 per cent tax: Private higher education Private healthcare The misconception that non-citizens, including PR spouses, do not pay taxes is a myth. Spouses who reside in the country for more than 182 days are required to pay taxes on their total taxable income on the same basis as Malaysians. Many of them are husbands and wives of Malaysian citizens, parents of Malaysian children, and are long-term residents who have endured years of bureaucratic hurdles to secure legal status in the country they already call home. 'Non-citizen spouses of Malaysians are not 'foreigners' — they work and contribute to the country and the economy, they pay taxes, and they raise Malaysian children. This 'othering' of our spouses and designating them with the blanket term of 'foreigners' hurts us and our families,' says Low, a Malaysian spouse of a non-citizen. Another PR spouse said, 'I often find myself in a grey zone — being a foreigner, yet not fully acknowledged as Malaysian. Although I contribute the same amount in taxes as others in similar income brackets, the treatment I receive often feels disproportionate.' PR spouses in Malaysia often bear higher costs for essential services such as: Public transportation: Excluded from RapidKL's MY50 pass, senior citizen, and OKU discounts Driving licences: Costs are double those for Malaysian citizens Education: Incur non-citizen rates for both public and private educational institutions, regardless of education level 'Policies like these affect Malaysian binational families who have made this country their home, but are again and again marginalised and left out simply because their spouse is regarded as a 'foreigner' and not fully recognised as part of the social fabric of this nation that they are. What impacts my non-citizen husband impacts me, a Malaysian, and our Malaysian children,' says Low. This disparity is particularly stark when compared with our neighbour, Singapore, a country where many Malaysians hold permanent resident status. In Singapore, PRs benefit from substantial subsidies for essential services, including: Healthcare: Reduced rates for treatment in public hospitals and access to schemes like MediShield Life for financial assistance with medical expenses Education: Significantly reduced tuition fees at public educational institutions for PRs and their children Such comprehensive benefits for PRs in Singapore stand in sharp contrast to Malaysia's approach. For PR spouses, these disadvantages significantly complicate the already challenging task of raising Malaysian children and committing to a long-term future in Malaysia. Constantly navigating a system where one family member is treated differently, or excluded from benefits that others enjoy, can lead to significant stress for the entire family. This creates a serious risk of 'brain drain,' where valuable talent eventually departs for countries offering more comprehensive social security and benefits for long-term residents and possibly even their Malaysian families. It's time to recognise the commitment of permanent residents by extending essential subsidies to them. This crucial step will not only retain valuable talent, strengthen our economy and reduce brain drain, but also ease their integration into Malaysian society. The government must not overlook the significant contributions of PRs, especially non-citizen spouses who are raising Malaysian children. These individuals are integral to the Malaysian family, contributing not just socioeconomically, but also by nurturing the next generation of Malaysians who will ultimately give back to the nation.
The Sun
4 hours ago
- The Sun
FMM urges ASEAN to boost trade integration for economic growth
KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has urged ASEAN to strengthen intra-regional trade and production networks to enhance economic integration. FMM President Tan Sri Soh Thian Lai emphasised the need for mutual recognition of standards, unified digital customs platforms, and regulatory alignment among member states. Soh highlighted that intra-ASEAN trade currently makes up only 22 per cent of the region's total trade, far below the European Union's 60 per cent. 'Closing this gap is crucial to unlocking ASEAN's full economic potential and ensuring long-term supply chain resilience,' he said in a statement. The FMM reaffirmed its commitment to collaborating with governments and regional stakeholders to foster a more integrated, stable, and competitive ASEAN economy. Soh also commended Prime Minister Datuk Seri Anwar Ibrahim's mediation in easing tensions between Thailand and Cambodia. 'This diplomatic success demonstrates Malaysia's growing influence in promoting ASEAN unity and stability. It also reaffirms the bloc's ability to resolve geopolitical challenges through dialogue and strong leadership,' Soh added. - Bernama
Barnama
5 hours ago
- Barnama
FMM Calls On ASEAN To Boost Intra-regional Trade, Integration
KUALA LUMPUR, July 30 (Bernama) -- The Federation of Malaysian Manufacturers (FMM) has called on ASEAN to intensify efforts to strengthen intra-ASEAN trade and production linkages. FMM President Tan Sri Soh Thian Lai stated that there is a need to advance mutual recognition of standards, harmonise digital customs platforms, and enhance regulatory coherence across member countries. He noted that intra-ASEAN trade currently accounted for only 22 per cent of total ASEAN trade, compared to around 60 per cent in the European Union. 'Closing this gap will be essential to unlocking ASEAN's full economic potential and building long-term supply chain resilience,' he said in a statement.
