KUALA LUMPUR • The Malaysian government is set to launch its third national car project by 2020 as envisioned by Prime Minister Mahathir Mohamad, said Entrepreneur Development Minister Mohd Redzuan Yusof.

"We attempt to revive and grow the industry due to its tremendous potential," Mr Redzuan told reporters after officiating at the TOC Automotive College convocation ceremony, according to Bernama news agency.

"Besides, auto component manufacturing is also one of the sectors that drives small and medium enterprises."

The plan has raised eyebrows as it could involve high start-up costs at a time when the government has vowed to cut spending to reduce a RM1 trillion (S$336 billion) debt.

Tun Dr Mahathir had also earlier agreed with his coalition partners that he would hand over the country's leadership to Datuk Seri Anwar Ibrahim after around two years.

Some critics say the government should expand and improve public transport such as the MRT and LRT.

The first national car project, which produced the Proton vehicles, was launched in 1983 as part of Dr Mahathir's drive to industrialise Malaysia in his first stint as prime minister.

Proton dominated the Malaysian market with its relatively low-priced models in the 1990s, netting a market share of 74 per cent at its peak.

But the brand has needed millions of dollars in government funding over the years and by last year, only 14 per cent of cars sold in Malaysia were Protons. Chinese carmaker Zhejiang Geely Holding Group bought a 49.9 per cent stake in Proton last year.

The second national car project has been more successful. Japan's Daihatsu Motor Corp is a key shareholder and the project's Perodua brand produces the most popular vehicles in Malaysia today.