Malaysia's national carmaker Proton has revived plans to acquire a car assembly plant in Indonesia as part of its expansion into Southeast Asia and to battle increasing competition under a regional free trade agreement, according to reports.

Agence France-Presse cited a Financial Daily source as saying that a letter of intent has been signed by the carmaker's distribution arm, Proton Edar, to acquire the plant in Cikarang, estimated to be worth $US20 million.

Proton Edar's Indonesian unit is proposing to buy the plant on a 95:5 joint venture basis with Indonesian businessman Ahmad Safiun, the report said.

The report noted that Proton first proposed in 2001 to buy the plant in Cikarang, which is an hour's drive south-east of the Indonesian capital of Jakarta, through a 70:30 joint venture with the original owner, PT Ningz Multiusaha.

According to the Financial Daily, the deal did not materialise because the Indonesian partner backed out due to capital constraints. The plant reportedly used to produce Chrysler cars for the Indonesian market but is now dormant after it was taken over by Indonesia's PT Bank Lippo.

Sources reportedly said that PT Proton Edar Indonesia is expected to complete by March an evaluation of the Cikarang plant, which will allow it to produce and distribute its cars in Indonesia and regionally to other Asean markets.

According to the report, Proton will initially produce the Waja sedan, followed by the Wira and Iswara models for taxis in Indonesia in August.

The AFP report said Proton already has plants in Iran and China, and has expressed interest in expanding to Indonesia, Thailand and Vietnam because the Malaysian car market, which is the largest in South-east Asia, has a serious overcapacity problem.