Hot on the heels of news that it has been talking with Volkswagen about a possible tie-up, local media in Malaysia now reports that Proton has been in talks with Hyundai Motor.

The Malay Mail said that talks took place between the two to consider the possibility of forming a strategic partnership.

The newspaper said Proton is keen to have a tie-up with Hyundai because of the latter's impressive track record and aggressive strategies.

However, Dow Jones reported that the company has played down the talk.

"We deny that we are in any kind of negotiations with Proton," Hyundai Motor Public Relations Director Oles Gadacz told Dow Jones Newswires.

"It's not us," Gadacz added.

Late last week it was reported that Volkswagen and Proton were negotiating, but it was not clear whether a prospective deal would involve VW taking a significant stake in Proton - which has nearly half of the Malaysian market. A tie-up could give Volkswagen access to Proton's production capacity, which could be used to make cars for sale in Southeast Asian countries, it said.

Proton is rapidly losing share in its home market as protection is gradually removed under AFTA trading rules and the company's profits have slumped. As capacity utilisation drops at its plants, it has been speculated that the company would become interested in getting a partner to utilise its capacity in some way.