Drop in sales

In 2006, Proton's sales dropped 30.4% from 166,118 in 2005 to 115,538 for the Malaysian market,with a later report indicating a 55% fall of sales to 962.3 million ringgit, its lowest in at least seven years.[14] This allowed Perodua to overtake Proton as the country's largest passenger carmaker for the first time, with a 41.6% market share, while Proton's market share fell from 40% in 2005 to 32% in 2006. In the period ending December 31, 2006, Proton has also suffered three consecutive quarterly losses. Compared to a profit of 86.5 million ringgit in 2005, the car company lost 281.5 million ringgit in 2006. Proton blamed discounts from rivals. Total losses in 2007s financial year climbed to $169 million.

The Employees Provident Fund (EPF) acquired an additional 830,000 shares in a transaction that spanned between January 5 and January 12, 2007.
Joint ventures and partnerships
Abortive strategic partnership with Volkswagen AG

In October 2004, Proton announced that an understanding had been reached with Volkswagen AG of Germany to establish a strategic partnership. Under the tie-up, the two carmakers were expected to exploit each other's strengths. Proton would gain access to Volkswagen Group's superior technical capabilities and technology. In return, Volkswagen Group would utilise Proton's spare capacity at the latter's Tanjung Malim plant to assemble cars for export to the South-East Asian market, where the German auto giant had a weak presence.

On 13 January 2006, Volkswagen Group finally announced that negotiations about the partnership had failed because its desires clashed with the terms and conditions offered by Proton; their interest was more in eventually controlling Proton Holdings, rather than just being a strategic partner.Despite this, Malaysian news announced that Volkswagen AG had signed an agreement to buy a 51% share in Proton on 26 January 2007, which turned out to be unfounded. Throughout most of 2007, rumours about continuing merger talks with Volkswagen Group, and occasionally General Motors surfaced in the local press and at briefings given by top government officials.

Finally however, on 20 November 2007, Proton announced that talks regarding any partnership with Volkswagen Group had ended with immediate effect, citing improving sales over the year, a favorable export outlook, and confidence in management turning around the company without external collaboration. This unexpected announcement resulted in a 19% overnight drop in Proton's share price to their lowest value in seven years, due to the market's perceived uncertainty about the future financial viability of the company in an increasingly competitive local and world market.
Detroit Electric

On 2 September 2008 Detroit Electric announced plans to progressively roll out affordable electric vehicles worldwide by the end of 2009. Proton cars are to be used and tested in order to validate Detroit Electric's technology and explore the potential to collaborate to create a range of pure electric cars. Detroit Electric has to date integrated its electric drive systems into Proton's Lotus Elise and two Proton passenger cars.Detroit Electric hoped to collaborate with Proton to sell electric cars for the Southeast Asian market or to use Proton's existing manufacturing platform to produce electric cars under the Detroit Electric brand. The company planned to roll out 30,000 electric cars by 2010, as he demonstrated their performance at a Proton test circuit in Shah Alam, west of the capital Kuala Lumpur.
Acquisitions
Lotus

In 1996, Proton acquired a 63.75% share in Lotus Group International Limited for £40,640,000. A later PriceWaterhouse Coopers audit would find that the CEO, Yahaya Ahmad, had inked the agreement on 16 October 1996. The agreement was presented to the board for approval on 27 November 1996. As part of the purchase agreement (signed prior to board agreement), there were restrictions placed on Proton's ownership of Lotus. One of the restrictions was a prohibition on diluting ACBN's remaining shareholding for a period of five years. This restricted Proton in its operation of the Lotus business and required Proton to guarantee a £40 million loan in 2000.
MV Agusta

In December 2005, Proton purchased a majority share in MV Agusta of Italy at 70 million Euro. MV Agusta was the manufacturer of MV Agusta, Husqvarna, and Cagiva motorcycles. A year later, Proton sold off its 57.7% share in MV Agusta to Italy's GEVI Spa for a token of 1 Euro. Due to heavy debt by MV Agusta, the selling enabled Proton to write off the losses off its book, but the buyer would assume the €107 million ($174 million) debt. In August 2007, GEVI SpA the company that bought over MV Agusta for 1 Euro sold the brand Husqvarna and its factory to BMW for a reported 93 millions euros leading to speculations by the Malaysian public of bad management of the company's board of directors resulting in further loss of reputation for the company.
Charges of protectionism

When the first Proton appeared on Malaysian roads in 1985, local wits promptly dubbed the Proton Saga as the 'Potong Harga', meaning the 'cut-price'. And for good reason as the Proton was at least 20% cheaper than non-national makes in the same 1.3 to 1.5 litre class. With both the low price and a dash of national pride working for it, the Proton got a rapid hold on the market. By 1988 the Proton, with a model lineup of one, had overtaken all other makes and models and grabbed 73% of the Malaysian passenger car market.

In 1983, when the 'national car' was planned, Malaysia had an annual new car market of about 90,000 units, and the market was growing annually by 20%. The Proton plant was designed to produce 80,000 units a year and could be geared up to 120,000 units. But in Proton's first full year of production (1986), total car sales took a severe dip to 47,000 and next year, due to a worsening economic situation, just 35,000. Only in 1988 did the market begin a recovery to 54,000 units, by now most of them Protons. Since then, the market has grown steadily to a 2005 peak of 417,000 cars

Government policy has kept the Proton cheaper than other makes by the simple strategy of taxing the competition, while giving Proton exemptions or rebates from these same taxes. Duties on packages of parts for assembly into complete cars in Malaysia is said to average about 30%. Proton is exempted from most of these

On 1 January 2008, the postponed-several-times full implementation of an ASEAN Free Trade Agreement which Malaysia originally signed on to in January 1992, was to finally have come into effect. The agreement would effectively bar practices that discriminate against goods (including vehicles) that are considered “Made in ASEAN” by the use of Tariff and/or Non-Tariff Barriers. This would practically eliminate most of the price advantage, achieved by way of the 50% rebate Proton (and other “Malaysian-made” cars) enjoy on a hefty (75 to 105%) engine-capacity-related Excise Duty applied to new cars sold in Malaysia.

This rebate is largely responsible for the non-Malaysia ASEAN-made cars costing between 30 and 60 % more than an equivalent locally-made vehicle. With a “level playing field”, within the confines of CEPT[22] (which till end 2009 allows a maximum 5% import duty, reducing to zero in 2010) using existing FOB prices, an ASEAN (Thai-made) Honda or Toyota would sell for within 10% of a comparable Proton, and would probably result in the devastation of Proton the company. It would appear that this would be an unacceptable consequence to the Malaysian government, so for the time being, local car manufacturers will be allowed to continue receiving the excise duty rebate, with the Government picking up the tab for probable penalties it will have to pay to ASEAN members for the gross disregard of the Trade Agreement requirements.

As 2008 progressed, it became apparent that more and more global manufacturers reasoned that the level playing field stipulated by CEPT will continue to be ignored by the Malaysian government for as long as possible. This temporarily derailed these manufacturers' previous plans to use Thailand (principally) as their regional manufacturing hub, and forced them to reintroduce Malaysian-assembly of some models from CKD. This allowed these foreign marques to benefit from better tariff structures applied to such vehicles, in an effort to remain competitive (in the non-National car segment), and to narrow the price difference between their models and equivalent (Excise Duty rebated) locally-made cars.

The very latest update to the Malaysian Automotive Policy framework (October 2009) fails to mention any change in this discriminatory rebate policy, thereby reinforcing the suspicion that the Government will not abide by stipulated "level playing field" requirements for the foreseeable future. It should be noted that the main “solution” being pushed by the Malaysian Government to maintain the pricing advantage of locally-made cars, by providing grants and subsidies (to counteract any potential removal of the excise Duty rebate) would also be deemed to be non-compliant with the Trade Agreement, contravening Non-tariff barriers to trade requirements.

The lack of direct competition at Proton models' price points (in Malaysia) has also allowed Proton, for many years, to continue selling very outdated designs, generally with scant regards to providing basic safety equipment such as airbags and anti-lock braking in domestic models. Additionally, J.D. Power survey results have consistently shown that Protons have poorer rankings in initial quality than the available competition
Formula 1

Proton-backed Lotus F1 was granted entry into F1 following the departure of BMW Sauber in 2009. This move saw the return of Lotus to Formula 1 following a 15-year absence. However, the team raced under the Lotus F1 Racing name not Team Lotus which was the historic name of all previous Lotus F1 teams. When Lotus returned to F1, Mike Gascoyne was appointed as technical director, and Tony Fernandes was appointed as team principal. However, Tony Fernandes announced that he would step down at the start of the 2010 season, so Riad Asmat was appointed as his replacement.