PT Proton Edar Indonesia, a subsidiary of Malaysian auto firm Proton, will sell its 24-million U.S. dollar automotive plant in West Java, following a change in the Malaysian government's policy on car import tariffs, a report said Friday.

President of PT Proton Edar Indonesia Safium said in Jakarta that the company was negotiating with PT Bajaj Auto Indonesia on the possible sale of the plant, reported The Jakarta Post newspaper.

"Initially we were negotiating to rent the plant to the company but now we are talking about selling it," he said.

Proton built the automotive plant with an investment of about 24 million dollars several years ago to gain access to the Indonesian automotive market.

However, recent changes in import tariffs on autos have made the company to rethink the need for a plant in Indonesia.

The Malaysian government agreed to cut import tariffs on completely built-up (CBU) cars from 40 percent to 15 percent in March this year and to 5 percent in 2008, in line with the Common Effective Preferential Tariff (CEPT) agreement signed by member states of the Association of Southeast Asian Nations (ASEAN).

Along with the change in the Malaysian government's policy on car import tariffs, Indonesia has also lowered its high import tariffs imposed on cars from Malaysia.

"This is why we feel it is no longer effective to run a factory here," Safium said, adding that the company was now waiting for formal approval from the Indonesian government to bring Proton cars from Malaysia into Indonesia with lower import duties.

Safiun said that, in addition to Bajaj Auto Indonesia, PT Kia Mobil Indonesia, which locally assembles Carens and Big Up cars from Korean automotive company KIA, and a Shanghai-based automotive producer had also shown interest in purchasing the plant.

"We have to be realistic. If it is not profitable, it is better to sell it," Safium said about Proton's plant, which has a capacity to produce 50,000 cars a year.

Separately, Suwanda Suwandi, the president of KIA Mobil Indonesia, said he was not aware of any plans to purchase the Proton factory in Cikarang, West Java.

"We are still using the assembly facilities owned by National Assembler," he said.

Source: Xinhua