Former Malaysian leader Mahathir Mohamad, who has become an adviser to Proton following his retirement as prime minister in 2003, on Wednesday said that an influx of foreign cars was hurting the national car maker, whose market share has been falling, according to an Associated Press (AP) report.

"There is no more protection for Proton, and even cars coming from countries which do not allow Proton to go in are freely sold in Malaysia," Mahathir reportedly said.

According to AP, industry observers have said Malaysia was encouraging the import of cars from China and Korea, even though Proton Holdings Bhd. finds it very difficult to export cars to countries such as China due to stringent trade requirements.

"The idea that we should protect the national car is no longer there," Mahathir told the Associated Press.

The news agency noted that Proton has long been sheltered from competition with high excise taxes and import duties on foreign cars, but is facing stiff competition from foreign car makers that have been adopting aggressive pricing strategies - Proton's market share fell to 44% in 2004 from 48% the previous year.

According to AP, the top foreign car makers in Malaysia are Toyota, Nissan and Honda with Korean companies like Hyundai close behind.

The report said that, as part of an agreement on a bilateral free trade pact with Japan, the Malaysian government this week agreed to immediately remove tariffs on components for vehicles that Japanese car makers assemble in Malaysia, and on vehicles that do not compete with Malaysian models.

Malaysia is Southeast Asia's biggest car market, with 380,568 vehicles sold last year, the Associated Press added.

Government officials agree on free trade