The history of the Malaysian automotive industry dates back to the early 1960s, when the Malaysian government developed a policy to promote an integrated automotive industry to strengthen its industrial base and reduce its dependency on the agricultural sector. The main objectives of the promotion of the automotive industry were the limitation of imports, the reduction of expenses in foreign exchange, the creation of employment and the development of the industrial sector. Even today, the automotive industry helps boost the country’s industrialization process, as it seeks to attain the status of a developed nation by 2020. The Malaysian national automotive industry is not only one of the major industrial sectors, but also a matter of national pride. In terms of fact and figures, the sector ranks amongst the top 20 in the world and disposes of the largest passenger car market in the ASEAN region.
 
The total installed production capacity for passenger and commercial vehicles amounts to 963,300 units per year and one million motorcycle units per year.
In 2008, the overall production of passenger vehicles totalled 530,810 – an increase of 18.6 percent compared to the previous year.
 
Compared to other countries in Southeast Asia, Malaysia’s total industry sales volume is at least eight percent higher than its closest rivals, for example Thailand and Indonesia.
According to actual figures from the Malaysian Automotive Association (MAA), total vehicle sales for the year 2008 reached 548,115 units. Since the beginning of 2009, consumer sentiment has recovered due to greater stability in the employment market.
 
Imports of motor vehicle parts and components in 2008 totalled RM 4.6 billion, compared with RM 4.5 billion for the whole year 2007.
 
To protect the local automotive industry, a number of restrictions were imposed on imports of foreign vehicles.
With more than half a million sales per year, Malaysia is the biggest market for automobiles in Southeast Asia. For a long time Malaysia’s government has protected its auto industry from foreign competition by introducing an Asian material content policy, which included imposing high tariffs as well as non-tariff barriers. 'National autos', those manufactured by Malaysian producers such as Proton and Perodua, benefit from preferential treatment compared to 'non-national' autos. The latter category includes even those automobiles that are manufactured in Malaysia by foreign-owned companies. High excise duties, import duties of about 50 percent (non-ASEAN) and so-called Approved Permits (APs) also count among these restrictions. The Ministry of International Trade and Industry (MITI) issues the latter only to 'qualified' local personnel and companies, which is the main reason for foreign companies to cooperate with local partners.
 
However, measures have already been undertaken to reduce trade barriers, as the government is being forced to abolish this policy in the near future due to its obligations in the World Trade Organization (WTO) and in the ASEAN Free Trade Agreement (AFTA).