National carmaker Proton will set up a plant in Iran and raise production to 60,000 units a year to tap the booming auto market there, a deputy minister said today.

Deputy Trade Minister Ahmad Husni Hanadzlah said Proton had an agreement with a local Iranian company to set up the plant by the end of this year or early next year.

The company would also set up a joint venture plant in China, he was quoted as telling parliament by the official Bernama news agency.

With reserves of RM3.6 billion, Proton had the financial muscle to form joint ventures overseas as it seeks to boost exports and compete with other global carmakers, Ahmad said.

He did not give details of the Iranian or the Chinese ventures. Currently, the sole assembler and distributor of Proton cars in Iran is Zaqross Khodro.

Proton late last year sealed a 16-year alliance with Iran's Automotive Industry Development Company (AIDCO) to supply Malaysian designed and built vehicle platforms and its own Campro engines until 2020.

Target: One million units

The alliance also paved the way for the establishment of a joint-venture firm to assemble, manufacture and sell a new generation of Proton vehicles.

AIDCO owns Iran's two top car manufacturers, Iran Khodro and SAIPA Khodro, which jointly control 90 percent of the country's market, where sales could hit one million units in coming years from an estimated 700,000 last year.

The overseas forays mark Proton's preparations for market liberalisation in 2005 under the Association of Southeast Asian Nations Free Trade Area (Afta), where import tariffs for most products in the region were cut to below five percent in the past year.

Malaysia, one of the region's top passenger car markets, obtained a two-year reprieve for its auto industry until 2005 but has said it would defer reducing duties to the required level until 2008, a move analysts said reflected deep concerns about the survival of the local car industry.

Proton used to sell six out of 10 new cars in the country but its market share plunged to 49 percent in 2003 from 60 percent in 2002 as sales tumbled to 155,420 units. - AFP