National carmaker Proton expects to perform better by the end of the first quarter in 2004, chief executive Mahaleel Ariff said, while warning that low priced South Korean cars pose a challenge.

Mahaleel said Proton's strategy next year would be to regain market share, keep cashflow positive and continue in profit.

"We believe the tide will be our favour by end of the first quarter 2004 although I believe the industry is slowing down.

"The year 2003 will certaintly end lower than 2001/02," he was quoted as saying by the Star newspaper Thursday in an interview.

Mahaleel said the Iraq war has had a direct impact on Proton, noting that the company lost out on a deal to supply 5,000 cars under the UN oil-for-food programme.

"Iraq had been a major market for Proton the past two years and this is certainly a setback," he said.

Competitors

Mahaleel said the influx of competitors into the domestic market, especially South Korean cars, is a concern to Proton and to offset the competition the company will have to launch many new products.

At the same time, Mahaleel said Proton will aggressively seek new markets and strategic alliance with companies in China, India and Iran.

"We see Indonesia, Thailand and even Vietnam as strong markets for our new products," he added.

The Asian Wall Street Journal last week cited industry sources as saying that Proton had sought another 20 years of tariff protection in a letter last month to the government.

Proton, set up nearly two decades ago as part of Malaysia's move into heavy industry, is already feeling the heat of stiff competition ahead of AFTA.

Sales dropped 10 percent last year to 239,783 units and by another 25 percent in the first 10 months this year.

Under the Association of Southeast Asian Nations (Asean) Free Trade Area Agreement (Afta), tariffs on most products in the region fell below 5.0 percent in January but Malaysia obtained a reprieve for its auto industry until 2005.

Mahaleel made no comment on the issue in the interview with the Star . - AFP