MITI Targets Rollout of Revamped Automotive Incentive Framework Next Year

RAWANG — The Ministry of Investment, Trade and Industry (MITI) is planning to introduce a revised New Customised Incentive Mechanism (NCM) for the automotive sector in 2027, as part of efforts to boost local production, streamline investment rules, and ensure that foreign manufacturers contribute more meaningfully to Malaysia’s industrial ecosystem.

Datuk Seri Johari Abdul Ghani, Minister of Investment, Trade and Industry, confirmed that the framework is currently under review and being fine‑tuned through extensive consultations with government agencies, industry associations, and major automotive players. The goal is to create a system that is easier to understand, more transparent, and closely aligned with the country’s long‑term industrial goals.

“We are still in discussions, and we are targeting its release next year, whether it is January, March, or June, we will decide in due course,” Johari told reporters after officiating the opening of MCE Holdings Bhd’s new RM50 million automotive manufacturing hub in Serendah on Tuesday. “Above all, we need to simplify the structure. Investors must be able to clearly see how incentives work and what is expected of them in return.”

Prioritising High‑Value Activities

The updated NCM will shift the focus away from general assembly activities toward more advanced, high‑value segments of the industry. These include automotive electronics, design and engineering, embedded software development, battery technology, advanced driver assistance systems (ADAS), and intelligent mobility solutions.

At the same time, the framework will strengthen localisation requirements, ensuring that incentives are tied directly to measurable contributions to the domestic supply chain. The government emphasised that the aim is not to shield the industry from competition, but to build an ecosystem that can compete globally.

“Protection without competitiveness will eventually become a liability. Industries that are insulated from market forces rarely evolve into global leaders. True success comes from continuous innovation, efficiency, and the ability to produce products that can stand on their own merits both at home and abroad,” Johari stressed.

Strengthening the Domestic Ecosystem

Over the past few decades, Malaysia has developed one of the most comprehensive automotive sectors in Southeast Asia. It currently supports around 730 specialised automotive vendors, employs more than 700,000 people, and contributed approximately RM84 billion to the national gross domestic product in 2025.

Despite these achievements, the sector faces a growing challenge: a widening trade deficit in motor vehicles and automotive parts. The deficit rose from RM13 billion in 2020 to RM33.8 billion in 2025, a trend driven largely by increased imports of vehicles and components as the industry transitions toward electric and new‑energy vehicles.

“Without a clear and forward‑looking strategy, there is a risk that imports will continue to dominate the market, putting pressure on our local suppliers and slowing down the development of our own capabilities,” the minister warned.

Clear Expectations for Foreign Investors

Johari reaffirmed that Malaysia remains open to foreign automotive investments, but made it clear that there are clear expectations attached. Companies setting up operations in the country must move beyond simple assembly and gradually increase local content, transfer technology, and develop domestic suppliers.

“We want to state this clearly: if your only intention is to sell cars in Malaysia, you do not need to build an assembly plant here. But if you come to establish manufacturing operations, we welcome you and will provide the necessary incentives on the condition that you reciprocate by helping grow our components industry and ensuring local businesses benefit from your presence,” he said.

The government acknowledges that full localisation cannot be achieved overnight, but it expects a clear roadmap and commitment toward increasing local value addition over time.

“Malaysia is not merely a market for selling finished vehicles. We want investors to bring their technologies, engineering expertise, and supply chains here, and use Malaysia as a regional hub. We understand that progress takes time, but we expect that within a reasonable period, a substantial portion of vehicle production will involve genuine and effective localisation,” Johari added.

With the new framework, MITI aims to transform Malaysia’s automotive industry from an assembly‑focused sector into a centre for innovation, manufacturing excellence, and sustainable growth, ensuring that the country remains competitive as the global industry shifts toward electrification and smart mobility.