Prime Minister Abdullah Ahmad Badawi said today that prices of cars built by national makers Proton and Perodua, and some foreign makes will fall following a new auto policy.

"Yes, the prices of Proton (cars) will unavoidably be reduced because Proton has to compete," Abdullah told reporters when asked if Proton car prices would drop following the release of the new auto policy yesterday.

"Proton has to have a price on its product which will be acceptable to the market. This is extremely important, they know that," he said.

He said prices for most cars would fall including autos imported in parts and assembled in Malaysia however sports utility vehicles, four-wheel drives and fully imported vehicles could maintain current prices.

Yesterday, a string of new measures was announced to boost its ailing auto sector, including tax cuts to five percent from 15 percent for cars from Southeast Asian nations.

To foreign market

"It will make the industry more dynamic," Abdullah said.

"We are now turning ourselves to the foreign market, to other countries, we're not just confining Proton to Malaysia. Proton must grow big, Proton must be competitive and the present management knows this."

National market share for embattled carmaker Proton slumped to 41 percent last year, down from 60 percent in 2002.

The barely profitable company has struggled with a reputation for producing shoddy and unimaginative models. As the government whittles away protection, foreign imports have become more attractive.