Malaysian national carmaker Proton has defended its request for another 20 years of tariff protection and announced plans to launch a series of cars this year powered by its new Campro engine to stay competitive, a report said Friday.

Chief executive Mahaleel Ariff was quoted as saying by the Star that Proton's request for duty exemption and for research grants was in line with the government's call for local firms to invest in research and technology, and to acquire new technology.

The carmaker has asked for 20 years protection because it will take a long time before it can profit from new engines and high technology, he said.

He noted that other governments, such as in Australia and Europe, also hand out incentives to support their automotive industries.

Market share shrunk

The government has remained silent so far on the request by Proton, which has been protected since 1985 by high tariffs and other advantages.

The tariff wall is gradually being removed with a new tax structure implemented in January, one year ahead of market liberalisation under the Asean Free Trade Area (Afta).

Tariffs on imported cars in Southeast Asia fell below five percent last year under Afta but Malaysia has obtained a reprieve for its auto industry until 2005.

The carmaker is already feeling the heat as its market share shrunk to less than 50 percent in 2003 for the first time in years under intense competition from Japanese and South Korean rivals.

Mahaleel said the Malaysian car market, which is the largest in Southeast Asia, has a serious overcapacity problem because demand was less than half of the annual supply of some 782,000 cars produced by assemblers and manufacturers here.

There are four car companies which have national or special status in Malaysia: Proton which is 52 percent government-owned, second carmaker Perodua which is 51 percent Japanese-owned, Naza Kia and Hyundai which are 100 percent private-owned, he said.

However, the current market can only support two national car companies, he said, adding that Proton did not receive any special treatment compared to the others.

Mahaleel said Proton will launch three new models that will change the face of Proton cars significantly and this new generation of cars will greatly improve sales and exports, which currently account for less than 10 percent of its total output.

New models

A new 1.6-litre Wira model will be launched "any time now," followed by the new 1.3-litre Satria and 1.2 litre Tiara cars in the second half of the year. All three have been benchmarked against German cars, he said.

Both the Wira and Satria replacement models will be fitted with Proton's new Campro engine and this will help cut costs because "the power train of a car accounts for 30 percent of its total production cost," he added.

Proton is banking on the three new models to boost sales and is expected to price the cars competitively, at around RM30,000 to RM50,000 (US$7,900 to US$13,150), an industry source told the newspaper.

Analysts say this is a crucial year for the carmaker, which faces more pressure because of higher duties and greater foreign competition under the new tariff structure. - AFP