Its president, Datuk Aishah Ahmad, said there should be a level playing field for local and foreign carmakers, as many of these foreign cars carried a lot of local components and provided business and employment opportunities to the locals.
"It is a very regressive move. I don't think it's right for the government to say that they want to stop all cars other than Proton to be brought into the country," she told reporters after a meeting with the Council of Eminent Persons here on Monday.
She said for the local automotive industry to move forward, the government must create a conducive environment through liberalisation like in Thailand and Indonesia.
"Thailand is exporting more than 1.3 million cars a year and Indonesia more than 100,000 vehicles. What is Malaysia exporting? Twenty to thirty thousand units a year," she noted.
Aishah said the National Automotive Policy, last updated in 2014, was due for another review to ensure more vehicles were exported from Malaysia.
She also urged the government to review its plan for another national car, saying it would disrupt the local industry which only had a small market with a total industry volume of about 600,000 a year.
"What we don't want is further incentives being provided for the new national car, which will really disrupt the industry. It does not help the industry at all," she explained.
On electric cars, Aishah said further investments and incentives were needed to grow the segment, which only saw 13 cars sold last year.
"It takes time. The infrastructure and incentives must be there for us to see further growth," she added.
Meanwhile, on biodiesel, Aishah said the local automotive industry was still not ready to adopt B10 (diesel with 10 per cent palm oil content) and could only support B7 at present.
"Most of our members are saying that B7 is what they can warrant on the vehicles. It would be difficult for us to provide a warranty for B10," she said.
She pointed out that the warranty was not provided by the local distributors or franchise holders but by the marque principals overseas.
Nevertheless, she said, if the government was still adamant to implement the B10 biodiesel, there should be options provided at petrol stations for a B7.
She said this practice was being used in Indonesia which had a higher biodiesel adoption with B15.
"Even though they have implemented B15, they have pumps that still provide B7 and B5. If it (B10) is available and all types of biodiesel are being provided, we can support that," she said.
Earlier in Parliament today, Prime Minister Tun Dr Mahathir Mohamad said the previous government's policy which favoured foreign cars had made it difficult for Proton to make a profit.
"The previous government allowed foreign cars to come in without giving Proton the opportunity to expand overseas," he said.
This, he explained, had created difficulties for the national carmaker to compete with global automotive giants.
"There is a need to impose certain conditions to limit foreign cars' access to the local market," he added. - Bernama