Malaysia auto firm Naza today signed a deal with Automobiles Peugeot to manufacture a local variant of the French carmaker's 206 model, a tie-up which they hope will help their efforts in Southeast Asian markets.

"It is a win-win partnership that provides the French automotive giant an opportunity to further strengthen its presence in the region post-Afta while bringing the Naza Group nearer to its goal to be a global car manufacturer," said Nasimuddin Amin, Naza's managing director, after the signing ceremony.

The deal will see 50,000 cars produced from 2006 to 2010 under the Naza brand, with production to start first at Naza's plant in Kedah and then shifting to a new plant in Penang in 2007.

The Malaysian variant of Peugeot's 206 will be a right-hand drive with a 1.4 litre engine in both automatic and manual transmissions, Naza said in a statement.

The Association of Southeast Asian Nations (Asean) hopes to achieve a zero-tariff regime by 2015, a key ingredient for its ambitious plan to create a single market and production base by 2020.

Malaysia, one of the region's top passenger car markets, cut import duties to 20 percent on Asean-made cars on Jan 1 under the Asean Free Trade Area (Afta) agreement. However, it will delay reducing duties to the required level of below five percent until 2008.

M'sia as a launch pad

Christian Delous, Peugeot's international operatations director, said the French automaker was keen to expand its business in Malaysia as it was the largest auto market in Asean.

"We want to develop our business in Asean countries, particularly in Malaysia, because Malaysia is the most important market (for) passenger cars and ... we are quite specialised in passenger cars," he said.

Delous said since Naza was a strong player in the local automotive industry, "we think we can increase our volume of sales a lot, first in Malaysia and after that in other Asean countries."

Peugeot would also produce the 206 model at Naza plants in Malaysia for export under its own brand to Indonesia and Thailand, two other important markets in Southeast Asia, he said.

"Southeast Asia is a very important potential market ... in Europe now we already have a very strong position and if we want to devleop volumes in the future, it's necessary to consider all the markets with big potential," he added.

Dominique Monet, director general for Peugeot's Asean regional office, said Peugeot would provide technical support to Naza and control the quality of the cars.

Peugeot and Naza have jointly appointed Cycle and Carriage Automobiles to provide after-sales support, Naza said.

Naza, one of Malaysia's largest automotive companies, currently assembles and distributes vehicles under South Korea's Kia and its own brands, as well as selling imported cars.

Last year it opened the 300 million ringgit assembly plant in Kedah which can assemble up to 50,000 units a year. The new plant in Penang will have an increased capacity of 100,000 cars, said Nasimuddin.