Foreign automakers have reason to smile about the opening of markets in Southeast Asia under a regional free trade plan but local assemblers and distributors are sporting deep frowns.

In anticipation of the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta), foreign manufacturers have begun phasing out franchises in order to cut out middlemen and boost their direct presence in the region.

The shake-up in the region's auto industry, especially in Malaysia, has spread gloom amongst local firms which have for years relied heavily on distributing rights for their survival.

"We are doomed," lamented a senior official at a car distribution firm in Kuala Lumpur.

"Afta is bad news for us. Foreign manufacturers have raised their investment in the region ahead of Afta to establish their presence and are taking back their franchises. Many of us will go bust."

This trend is not unique to the region and is partly due to the consolidation of the global car industry, which is forcing manufacturers to improve margins, said the official, who declined to be named.