FRENCH carmaker PSA and Chinese rival Geely will go head-to-head in a bidding war over Malaysian carmaker and Lotus owner Proton as both suitors look to expand their sales in south-east Asia.

The bid comes at a vital time for Proton as it struggles to meet tightening emissions standards for the engines it uses in its cars. Despite remaining on sale in Australia, the brand has not imported any new cars here since more strict petrol engine emissions standards were introduced in November 2016.

The Financial Times reported today that both groups are about to offer rivalling bids to Proton’s financially strapped parent company, DRB-Hicom. It is not clear, though, whether sports car brand Lotus is part of the deals being struck.

Lotus Elise concept

DRB-Hicom has hinted that a decision on a “foreign strategic partner” will be announced before the end of March.

Proton was founded in 1983, initially building Mitsubishi-based cars under licence. It now builds and exports a number of models globally.

Lotus Elise concept

Proton has said it will have engines that meet tougher Euro 5 emissions standard by late this year – a move necessary to kickstart its sales in Australia. The interest both PSA and Geely are showing suggests the Malaysian carmaker is shopping around for a source of engines instead of tapping its own bank accounts to fund the project.

Lotus Elise concept

Proton bought Lotus for more than $A80 million in 1996. In 2013, the Malaysian carmaker said it wanted to run at near-full capacity and produce 500,000 cars across both brands by 2018, a target it has missed spectacularly – production hit 150,000 units in 2016.

Both Proton and Lotus posted losses in 2016.