The signing of the memorandum of understanding with PT Adiperkasa Citra Lestari was witnessed by visiting Indonesian President Joko Widodo and Malaysian Prime Minister Najib Razak.

Proton said in a statement that the two companies will conduct a feasibility study and explore areas of cooperation. If the study shows the project is feasible, the companies will sign a joint venture agreement.

Proton Chairman Mahathir Mohamad, who is a former prime minister of Malaysia, said the study is expected to be completed in six months. He said the Indonesian market, where auto manufacturing is dominated by foreign car makers such as Toyota, has great potential. Auto sales exceeded one million vehicles last year, he said, and annual sales of four million vehicles is conceivable in the long run.

"We would like to make use of the joint venture with Indonesia to expand and become an ASEAN car," Mahathir said, referring to the 10-member Association of Southeast Asian Nations. The concept of an ASEAN car would involve investment by other countries in the region.

PT Adiperkasa's CEO Abdullah Mahmud Hendropriyono said a national car would be a major development for Indonesia, helping to spur its auto industry and increase the country's technical know-how. PT Adiperkasa is a private company backed by the government, Mahathir said.

Indonesia, with a population of 250 million, could be a lifeline for loss-making Proton, which is struggling to boost sales after its fortunes dwindled due to greater foreign competition.

Once the king of the road in Malaysia, Proton's share of domestic car sales has plunged from about 50 percent a decade ago to 21 percent last year. Proton's exports are lackluster, with sales hindered by perceptions of poor quality and bland models.

Mahathir, who founded Proton in the early 1980s during his rule, said Proton would have to invest in the Indonesian project and may not make money at first, but it would benefit once the car is accepted and sales pick up in Indonesia.

He said Proton will study the Indonesian market to see if it can modify any of its current models for assembly there, before delving into designing and manufacturing a truly Indonesian car.

If the project is successful, he said there should be tariff protection to enable Indonesia's auto industry to grow.

Countries such as Japan and South Korea protect their auto industries and "we should adopt some of their strategies," Mahathir said. "It will not be unusual for Malaysia and Indonesia to consider protecting an infant baby."

Indonesia's president Widodo, who arrived in Malaysia on Thursday for a three-day official visit, toured Proton's manufacturing plant.

Malaysian car maker Proton has inked an agreement to help Indonesia study the feasibility of developing and manufacturing its own national car.

The signing of the pact with PT Adiperkasa Citra Lestari was witnessed by visiting Indonesian President Joko Widodo and Malaysian Prime Minister Najib Razak.

Proton said in a statement Friday that the companies will sign a joint venture agreement if the feasibility study shows the project should go ahead. Officials said the study is expected to take six months.

Because of Indonesia's huge market, the project could provide a lifeline to Proton, which is struggling to boost sales after its fortunes dwindled due to greater foreign competition.

Proton's exports have remained lackluster, with sales hindered by perceptions of poor quality and bland models.

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