KUALA LUMPUR -- Malaysia's top car maker Proton said on Wednesday it signed a deal in Iran to tap growth markets in the region, as it tries to offset what is set to become a challenging domestic market.
State-controlled Proton has about 60 percent of the Malaysian car market but it benefits from protective tariffs which will be removed by 2005 under a Southeast Asian free trade pact.
Proton, or Perusahaan Otomobil Nasional Bhd, signed a 15-year agreement with Automotive Industry Development Company of Iran (AIDCO) to form a joint venture which will give Proton a gateway to the Middle East, Turkey and the former Soviet Union.
At present, Proton only sells its cars in Iran.
AIDCO, a subsidiary of Industrial Development and Renovation Organisation of Iran, owns car makers Iran Khodro and Saipa Khodro which have 90 percent of Iran's car market.
"We are discussing with our Iranian counterpart to produce two litre upwards engines. We also like Iran to help market some of our cars in certain countries," Proton Chief Executive Tengku Mahaleel Tengku Ariff told reporters.
No value was given for the deal.
Proton said in a statement the firm will look into the assembly, manufacture and sale of its Campro engine including compressed natural gas option under licence for Iran and other markets.
The partnership will assemble and sell Proton cars in Iran under a brand name to be decided later. Iran Khodro and Saipa Khodro will use Proton engines.
The deal comes after Proton on Tuesday signed a letter of intent to buy a 50 percent stake in Italian motorcycle maker MV Agusta Motor SpA.