Perusahaan Otomobil Nasional Bhd (Proton) is gearing up for a third stab at carving out a bigger slice of the lucrative compact car market segment for itself.

Sources said Proton will unveil a new one-litre compact car codenamed SCM as early as late next year as part of efforts to broaden its earnings base.

With about 100,000 units sold annually, the sub-market for vehicles of one litre and below accounts for a quarter of the country's total new vehicle sales.

Proton first ventured into the small car market with the Citroen-based Tiara, but it has since been phased out. It also launched the Juara mini multi-purpose vehicle in the middle of last year, which is not doing very well.

The Tiara suffered from the perception that its technology is outdated while the boxy Juara, a clone of the Mitsubishi Town box, has had a hard time winning over conservative local car buyers. The Juara was launched in July 2001 and by the end of the year only about 770 units were sold.

The local one-litre and below sub-market has long been dominated by Perusahaan Otomobil Kedua Sdn Bhd (Perodua), which sells the popular Kancil, Kenari and Kelisa as well as the 1.3-litre Kembara sports vehicle and the Rusa multi-utility van.

Proton is now banking on the SCM to change that, the new car being said to be very competitive in cost and performance, as well as attractive in design.

Of the 327,447 passenger cars sold in 2001, Perodua had a 29 per cent share, after Proton's 63 percent. There are currently no marques under 1,000cc and Perodua technically enjoys a monopoly in the segment.

Total passenger car sales for 2002 are expected at about 340,000 units, while overall vehicle industry sales should rise 3 per cent to 410,000 units, according to the Malaysian Automotive Association.

Sources said Proton had hired two foreign specialist concerns to help design the SCM - Proton's British subsidiary Lotus Group and a design outfit of South Korean conglomerate LG Group.

"The South Korean company was earlier expected to come out with the design first, but it has run into some problems with a South Korean carmaker regarding the design.

"Lotus is now making a lot more progress in the development," said a source close to the project. But the South Koreans have since sorted out the problems and are back in the SCM development game plan, the source noted.

The SCM is only one of a string of new Proton models slated for launch between now and 2005, as it grows in confidence and competitiveness in the industry which it first entered 16 years ago.

Models in the pipeline include a 1.8 Waja variant, expected to be launched in the next two months or so, as well as replacements for the Wira and Satria, a pick-up truck, and a sports car. Most of the new cars will have input from Lotus.

Aside from Perodua, Industri Otomotif Komersial (M) Sdn Bhd (Inokom) is looming as a new competitor.

Inokom, accorded national carmaker status a few months ago, is currently mainly involved in making light commercial vehicles. It will roll out a multi-function vehicle (MFV) soon. Based on the Hyundai Atoz, it is a five-passenger one-litre micro MPV hatchback and will be produced at Inokom's plant in Kedah.

When contacted, some analysts welcomed Proton's re-entry in the compact car segment, saying the market was big enough for both the company and Perodua, adding that consumers would be spoilt for choice in terms of affordable cars.

But others do not think so.

"It will not be beneficial to the national car industry. Instead of competing head-on, Proton and Perodua will benefit more if they cooperate and pool resources," one said.

Having said that, Perodua is more than ready to face stiffer competition given its established brand and operation, he added, noting that a recent restructuring has placed the company on a solid fooring to compete in the country and regionally.

Technical partner Daihatsu, together with Mitsui, of Japan has bought majority stakes in Perodua's car and engine production subsidiaries - Perodua Engine Sdn Bhd and Perodua Manufacturing Sdn Bhd - through Perodua Auto Corp Sdn Bhd.

The exercise was effected in preparation for full liberalisation of the industry under Asean Free Trade Area in 2005. Perodua will be the main manufacturer of the Daihatsu cars for the Asean market. Sales could start as early as 2004.

It says EON should be fairly valued at 4.5 times FY04 earnings versus the sector's average of 6.5 times. "However, we have cut our revised net asset value (RNAV) estimate from RM10.60 to RM9.52 per share to reflect the lower earnings forecasts."

As at 4 pm, EON was up five cent to RM8.80.