Troubled carmaker Proton has lost its top dog status after nearly a quarter-century as Malaysia's biggest-selling carmaker was edged out by another homegrown manufacturer, Perodua.

"This is the first time Perodua has secured the number one spot," Malaysian Automotive Association (MAA) president Aishah Ahmad said Thursday.

Proton's market share has fallen sharply in recent years due to the whittling away of duties that has made imports more affordable and a persistent reputation for poor quality and unimaginative models.

Proton was set up in 1983 as part of Malaysia's drive into heavy industry while Perodua began operations in 1995 as a producer of small and fuel-efficient compact models.

In 2006, Perodua led national sales with 152,733 units, giving it a market share of 42 percent, up from 32 percent the year before, according to MAA data.

Proton sales fell to 115,538 units for a market share of 32 percent, down from 40 percent in 2005. It had held the top sales spot since 1985.

Japanese small-car maker Daihatsu Motor, a subsidiary of Toyota, owns a 51 percent stake in Perodua which has produced a series of attractive models well suited to the Malaysian market.

In a telling tale, Proton's new compact Savvy model launched a year ago has been ignored while Perodua's Myvi with its better looks and high-quality interior has a long waiting list and is massively outselling the Savvy.

Loss-making Proton is in the process of selecting a strategic partner to arrest its sharp decline and is in negotiations with US auto giant General Motors, Volkswagen of Germany and PSA Peugeot Citroen oF France.

The Malaysian government owns 59 percent of Proton, including a 43 percent stake held by its investment arm Khazanah Nasional.

The MAA said sales of new motor vehicles in Malaysia, Southeast Asia's biggest passenger car market, fell 11 percent to 490,768 in 2006 and forecast growth in 2007 to remain flat with just 1.9 percent expansion to 500,000.

Aishah said the slowdown was due to higher interest rates, stringent approval processing of hire-purchase loans and shorter repayment periods, as well as higher fuel costs and extremely weak used car prices.

"It will be a competitive year (in 2007) but the worst is over. Consumers will have to accept the prices for their second-hand cars," she told a press conference.

Sales of imported vehicles fell 15.1 percent last year to 80,931 in 2006, with this segment sector led by Japanese carmakers Toyota, Honda and Nissan.

Ang Bon Beng, executive director of Nissan distributor Edaran Tan Chong Motors, said vehicle sales for the first quarter of 2007 were expected to be quiet.

"Only in the second quarter, when industry players bring in new models, will there be a slight improvement," he said, adding that Nissan will introduce two new models.

"This month is unusually quiet (ahead of the Lunar New year celebration in February). It is quite abnormal compared to the last two years. I expect sales to be flat for the whole year," he added. - AFP