Malaysia's beleaguered national car company Proton has lost its position as the country's biggest-selling carmaker to rival Perodua, also a national car company.

Proton had held the No. 1 position since former prime minister Mahathir Mohamad started the company in 1983 to help jumpstart the country's industrialisation.

Perodua was started to complement Proton, rather than compete with it.

Proton's slide will put further pressure on its management.

"This is the first time that Perodua has secured the No. 1 spot," Madam Aishah Ahmad, president of the Malaysian Automotive Association (MAA), said yesterday, announcing last year's sales figures for South-east Asia's biggest passenger car market.

Perodua sold 152,733 cars last year, securing 42 per cent of the market.

Proton's sales fell to 115,538 units in the same period, giving it a market share of just 32 per cent, down from 40 per cent the previous year.

The company's sales have been sliding in the past few years because of competition, concerns about poor quality as well as the slow roll-out of new models.

Its newer models, the mid-size Gen 2 and Waja, have been only moderate successes while one of its latest offerings, the Savvy, was beaten in sales figures by its rival, the MyVi from Perodua.

Proton's performance so far has been a matter of pride for some Malaysians because it is more than two-thirds owned by government-linked enterprises.

Perodua, however, has Daihatsu, a subsidiary of Japan's Toyota, as its majority shareholder.

Tun Dr Mahathir has blamed the government's policies for Proton's slide.

Since last year, Malaysia has been reducing protectionist duties on foreign cars, resulting in more competition for local companies.

Proton, meanwhile, has been searching for a new foreign partner to help bring in technology and further its development.

It is now in talks with American giant General Motors, Volkswagen of Germany and PSA Peugeot Citroen of France. A decision will be announced in March.

Proton's decline and Perodua's rise come during a slow year in car sales in Malaysia, caused by higher loan costs and a subdued economic outlook.

Total car sales fell by 11 per cent to 490,768 units, the first drop in three years.

Madam Aishah from MAA attributed the poorer performance of the industry to lower used-car prices, costlier fuel and shorter loan repayment periods.