Models unveil the Lotus 410 sport automobile, produced by Group Lotus Plc, a luxury unit of Proton Holdings Bhd, during the 86th Geneva International Motor Show in Geneva, Switzerland, last year. BLOOMBERG VIA GETTY IMAGES

Zhejiang-based company to take 49.9% stake in Malaysian carmaker

Chinese automaker Zhejiang Geely Holding Group is to buy 49.9 percent of Malaysia's largest car manufacturer Proton, with a final agreement expected to be signed in July, a move that will speed up its inroads into the Southeast Asian market.

The forthcoming acquisition is part of a binding contract it signed with Proton's parent company DRB-Hicom, Geely said on Wednesday, although the value of the deal was not released.

The Chinese automaker, which will be Proton's only foreign partner, will also enjoy a 51 percent share of Lotus, a British sports carmaker owned by Proton.

Geely said the agreement laid the foundations for a wider framework for it to explore joint synergies in areas such as research and development, manufacturing and market presence.

Proton, founded in 1983 by Malaysian prime minister Mahathir Mohamad, was once one of Malaysia's flagship companies. However, it has been struggling with falling sales in recent years.

Proton sold around 72,000 cars in 2016, a 54 percent slump from its record high of 158,700 vehicles in 2011.

Last year, the carmaker received 1.5 billion ringgit ($338.2 million) in government aid on the condition that it pursued a turnaround plan and sought a foreign partner.

In addition to Geely, several other companies expressed interest, including French carmaker PSA Group, Japan's Suzuki Motor Corp and French carmaker Renault Group.

Li Donghui, executive vice-president of Geely, said: "With Proton and Lotus joining the Geely Group portfolio of brands, we strengthen our global footprint and develop a beachhead in Southeast Asia."

Li said Geely will help restore Proton to its former glory with its technology and management resources, and also aim to unleash the full potential of Lotus cars and bring it into a new phase of development.

Lotus has formed a joint venture with a Guangdong-based company to localize production of its cars in China, with the first model set to roll off the assembly line in 2019. But analysts said that Geely's main goal in the short term was to make inroads in Southeast Asia.

Yale Zhang, managing director of consulting firm Automotive Foresight, said acquisition is the best way for Geely to get a foothold in the region that has long been dominated by Japanese brands.

Proton's manufacturing facilities will also qualify the Chinese automaker to ship vehicles tax-free anywhere among the 10 members of the Association of Southeast Asian Nations, with a combined population of more than 600 million people.