Now day, Malaysia has few local car manufacturers which are Proton, Produa and Naza. In fact, Proton is Malaysian largest automotive manufacturer and also vision and idea from government of it establishment. So, it developed under a system of protection, regulation and promotion through high tariffs, local content scheme, and import restrictions under the NAP. For instance, government policy has kept the Proton cheaper than other makes by the simple strategy of taxing the competition, while giving Proton exemptions from these same taxes. Duties on packages of parts for assembly into complete cars in Malaysia is said to average about 150%. Proton is exempted from most of these. So with those advantages, the price of Proton car is tremendously low compare to other imported car, moreover with both the price and a dash of national pride working for it, the Proton got a rapid hold on the market in short period of time. By 1988 the Proton had overtaken all other makes and grabbed 73% of the passenger car market. With over protection system for Proton, these results in Proton failed to promote an efficient industry capable of competing internationally.  

However, with the recently introduced New National Automobile Policy (NAP), there are critics of not much improvement and the government will continue protecting domestic cars, making the public suffer. The revised NAP will not lower car prices and the government will maintain the high import duty and excise duty as the taxes were important “revenue sources for the Government.” In fact, it is meant to protect domestic cars. It is disappointing that the automotive industry has not really moved towards openness, which has contravened the Prime Minister’s commitment to implement economic liberalization. A protection which is too strong will undermine the country’s efforts to attract foreign investment.

As the ASEAN Free Trade Agreement (AFTA), Malaysia government has postponed several time of fully implementation in order to protect Proton. In fact, with AFTA there are maximum 5% of import duty, that’s mean other imported car like Honda, Toyota would able to sell the car in lower price or same price with Proton car. Thus it would probably devastation of Proton the company. It will also allow the entry of relatively cheaper imports which is expected to heighten competition in the industry. To survive, domestic firms must work doubly hard to strengthen their competitiveness in anticipation of the day when no protection will be in place. This would require substantial improvements in the efficiency and productivity of both domestic assemblers and parts manufacturers, reduction in production costs, and expansion of market size to achieve economies of scale. Instead of protect it, government should train them how to compete in open free market. For instance, temporary protection, once the industries attain a desired size, the protection and tariff can be removed. Then let it operated and competed in open free market.

Proton in Malaysia considers monopoly on the passenger car market which backed with Government protection policy therefore it becomes a leader of sales in Malaysia. However in 1993, there a second Malaysia second automotive manufacturer had been established, “Perodua”. Thus Perodua becomes a biggest competitor for Proton, moreover Perodua sales is overtaking Proton in short period of time since it first launching. In 2006 and 2007, Perodua became best selling car company in Malaysia.

As conclusion, as the government continues protecting local car manufacturer and refuses to open up the market, it will cause the local car manufacturer always a baby that cannot independent and need supports from government thus also will cause them cannot competing in international market. As a consumer, we are the one who suffer and need to pay something that not value of money. The government claims that it wants to transform the country into a high-income country. But before we can see any specific programs to increase revenue, the burden has been aggravated. We have to pay annual service taxes for credit and charge cards and the government wants to impose the goods and services tax (GST) in the future. As our incomes are not able to catch up with surging housing and car prices, so it is not worth it to continues to feed on illusion.