Malaysia's second national carmaker Perodua is eyeing an assembling pact with Japan's Toyota Motor Co. in a bid to strengthen its foothold ahead of market opening in 2005, a report said yesterday.

Japanese minicar maker Daihatsu Motor Co. Ltd., which is a subsidiary of Toyota, owns 51 percent stake in Perusahaan Otomobil Kedua Sdn. Bhd. (Perodua).

"Perodua is manufactured by Daihatsu, which in turn is owned by Toyota. So it is a natural progression," an industry source told The Star , saying negotiations were underway.

Small number

Analysts said the contract was likely to involve o­nly a small number of cars, possibly about 10,000 units, as Perodua's factory in Rawang in central Selangor state was running at near full capacity.

But they said the tie-up showed that Perodua's efficiency had improved since Daihatsu took over as controlling shareholder more than a year ago, with production costs slashed by some 30 percent.

It would prepare the carmaker for market opening in 2005 under the Association of Southeast Asian Nations (Asean) Free Trade Area (AFTA), they added.

The Perodua factory has the capacity to churn out 150,000 cars and produces 130,000 units, but the daily said it could easily be expanded.

It noted that Perodua, which produces a range of small and fuel-efficient models, has aimed to raise production capacity to 240,000 units under its medium to long-term business plan.

Surging sales

Last year, Perodua's sales surged 21 percent to 114,265 units, giving it a market share of 32 percent, up from 29 percent in 2001.

The country's main carmaker Proton controls 60 percent of the market.

Both Perodua and Proton are scrambling to boost competitiveness as Malaysia's high import tariffs o­n foreign cars will end under AFTA.

AFTA obliges Asean nations to cut tariffs for most products in the region to a maximum five percent by 2003, but Malaysia has obtained a two-year reprieve for its auto industry until 2005.