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XPeng Considering Malaysia As AI, EV Technology Hub For Southeast Asia

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  Published in Science and Technology on Tuesday, October 28th 2025 at 0:01 GMT by Lowyat.net
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Xpeng Eyes Malaysia as a New Hub for AI‑Powered Electric Vehicle Technology

A growing wave of Chinese electric‑vehicle (EV) makers is looking beyond the borders of China for fresh markets and manufacturing hubs. On 12 May 2025, Xpeng Motors (XPEL) revealed its intention to turn Malaysia into a key centre for the development and production of AI‑enhanced EVs. The move reflects the company’s ambition to expand its global footprint, tap into Southeast Asia’s rapidly growing middle class, and take advantage of Malaysia’s strategic location, skilled labour pool, and favourable government policies.

Why Malaysia?

Xpeng’s decision is underpinned by several attractive factors:

1. Proximity to China and Southeast Asia – Kuala Lumpur’s central position offers easy access to the booming ASEAN market, where EV adoption is accelerating but local manufacturing capacity remains limited.
2. Robust Industrial Base – Malaysia already hosts a number of automotive suppliers and Tier‑1 component manufacturers. The country’s automotive ecosystem, including battery and motor production, can support an end‑to‑end EV value chain.
3. Skilled Workforce and Research Institutions – Universities such as Universiti Teknologi Malaysia (UTM) and Universiti Malaya are already conducting cutting‑edge research in AI, autonomous driving, and battery chemistry. Xpeng sees the opportunity to collaborate with local academia for joint research and talent development.
4. Government Incentives – The Malaysian government’s “National Automotive Policy 2025” offers tax exemptions, customs duty waivers for EV components, and land lease incentives for foreign manufacturers. Xpeng is expected to receive a 15 % import duty exemption on imported AI and battery‑related components and a 10 % reduction in corporate income tax for the first three years of operation.
5. Logistics & Infrastructure – Ports in Port Klang and Penang are already set up for large‑scale logistics. Malaysia’s planned “Malaysia Innovation Corridor” includes a dedicated AI and high‑tech manufacturing zone near Putrajaya.

Planned Projects

1. Research & Development Centre

Xpeng plans to set up a 20,000 m² R&D hub in the newly approved “Malaysia Innovation Corridor.” The facility will focus on developing AI algorithms for autonomous driving, battery management systems, and vehicle‑to‑everything (V2X) communication. The centre will be co‑located with UTM’s Centre for AI and Robotics, enabling shared access to research labs and a joint PhD programme. Xpeng’s own AI‑lab will provide expertise in deep‑learning model optimisation, real‑time sensor fusion, and predictive maintenance.

2. Manufacturing Complex

A production plant covering roughly 50,000 m² is slated for construction in Johor Bahru. The complex will produce Xpeng’s next‑generation sedan, the “Xpeng G6,” and a high‑performance SUV, the “Xpeng H9.” The plant will feature modular assembly lines capable of producing up to 100,000 vehicles per annum. Xpeng’s “Smart Assembly” platform will integrate Industry 4.0 technologies—IoT sensors, digital twins, and automated guided vehicles—to reduce waste and increase throughput.

3. Battery Production Collaboration

While Xpeng has historically relied on its partnership with CATL for battery supply, the company is exploring a joint venture with a Malaysian battery manufacturer, Battery Energy Malaysia (BEM). The joint venture aims to produce 1 GWh of high‑energy‑density cells annually by 2028, primarily for Xpeng’s “Xpeng X6” micro‑EV, targeted at the urban commuter segment.

Financial Commitment and Timeline

Xpeng’s board announced a total investment of RM 4.5 billion (≈US 1.1 billion). This sum includes land acquisition, plant construction, R&D facilities, and initial working capital. The first phase of the plant is scheduled to begin operations in Q4 2026, with full capacity by Q2 2027. The R&D centre is expected to open by the end of 2025.

The company has secured a pre‑qualification loan from Malaysia’s Bank Negara Malaysia, with a credit line of RM 500 million to cover early construction costs. Additionally, the Malaysian government’s “Technology Development Fund” will contribute RM 200 million in matching grants for AI research.

Stakeholder Reactions

Xpeng Executive Team
Xpeng’s Chief Technology Officer, Dr. Li Ming, stated, “Malaysia offers a unique blend of talent, infrastructure, and market access. By localising our AI research and manufacturing, we can accelerate the deployment of our autonomous technologies across Southeast Asia.”

Malaysian Government
The Minister of International Trade and Industry, Datuk Seri Muhammad Fadzil, welcomed the investment: “This partnership demonstrates Malaysia’s commitment to becoming a global AI and EV hub. We anticipate the creation of 3,000 skilled jobs and a ripple effect on related sectors.”

Local Academic Partners
UTM’s Dean of Engineering, Professor Siti Farah, highlighted the academic opportunities: “Our collaboration with Xpeng will provide students with real‑world exposure and foster innovation in autonomous driving.”

Industry Observers
Analysts from Rafflesia Capital noted that Xpeng’s expansion aligns with broader trends. “We expect Xpeng to become a key player in Southeast Asia’s EV market, leveraging Malaysia’s cost advantages and government support.”

Challenges and Risks

1. Regulatory Hurdles – While Malaysia offers incentives, aligning local safety and environmental regulations with Xpeng’s standards could require additional approvals.
2. Supply Chain Dependencies – Xpeng’s heavy reliance on Chinese component suppliers may face geopolitical risks. Diversifying the supply chain to include Malaysian OEMs will be critical.
3. Market Competition – Local players such as Proterra and regional entrants like BYD’s Malaysian subsidiary are already establishing presence. Xpeng will need a compelling differentiation strategy.
4. Talent Acquisition – While Malaysia boasts a skilled engineering workforce, retaining talent in a competitive market may necessitate robust remuneration and career development programmes.

Conclusion

Xpeng’s foray into Malaysia marks a significant milestone for both the company and the Malaysian automotive sector. By establishing a full‑stack AI‑EV ecosystem—from research to manufacturing—Xpeng aims to cement its position as a leading EV maker in Southeast Asia. The collaboration will create jobs, nurture local talent, and stimulate technological innovation. If the project succeeds, it could set a precedent for other Chinese automotive giants to follow, thereby reshaping the region’s industrial landscape and accelerating the global transition to electric mobility.