Prime Minister Abdullah Ahmad Badawi said today national carmaker Proton would not be granted new tariff protection because it could now stand on its own feet with the launch of its new generation of cars.

He was speaking after launching the Proton GEN-2 model, the first of a new generation of cars to roll out of Proton's new hi-tech manufacturing plant in Tanjung Malim in northern Perak state.

"We have not given any more to Proton than what they have got from us before and neither are we reducing what we had already given," Abdullah, who is also finance minister, told reporters.

"We believe that Proton now is in its new chapter and after it has successfuly launch the GEN-2 car, will be able to stand on its own. The new factory will be a great help to Proton in the future."

His comments followed reports the carmaker, set-up in the mid-1980s as part of Malaysia's move into heavy industry, has sought another 20 years of tariff protection after its sales were hit badly last year by stiff foreign competition.

Proton has been protected for nearly two decades by high import tariffs on foreign cars but this will gradually disappear from 2005 under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta).

'Pampered son'

Abdullah told the carmaker to put more emphasis on research and development to boost its engineering capability and to remain innovative ahead of market liberalisation in 2005

"The company has to be competitive. There is no other choice if Proton is to remain in the car business," he added.

Earlier in his speech, Abdullah said the launch of the GEN-2 car marked Proton's transition from a "pampered son to become a respected grown-up" within a short span of under two decades.

Although the road ahead was difficult, he was confident Proton would grow in strength but said the company should intensify its marketing efforts and explore new export markets.

The 1.6-litre GEN-2 car, jointly developed with its British unit Lotus Group, sports an entirely new design from the older Proton models and is fitted with its own Campro engine which Proton said has been rigorously tested in six countries worldwide.

The GEN-2 is priced at RM52,888 for the manual version and RM55,888 ringgit for the automatic version.

Chief executive Mahaleel Ariff said Proton aimed to sell between 50,000 and 80,000 units of the GEN-2 model this year.

Sales tumbled

The new Tanjung Malim plant, which is 60 percent automated, is five times larger than Proton's existing facility in central Selangor state and is expected to produce up to 150,000 units in its first year of operation, he added.

Proton is pinning its hopes on the GEN-2 and two other new models expected to be launched this year to revive sales after its market share tumbled to 49 percent last year from 60 percent in 2002.

Its car sales fell by a sharp 27.5 percent to 155,420 units last year.

Under Afta, import tariffs for most products in the region were cut to below five percent from last year.

Malaysia obtained a two-year reprieve for its auto industry until 2005 but it recently said it would further defer reducing duties to the required level until 2008. - AFP