Talks between the two companies have reportedly failed with both sides failing to reach an agreement on the partnership. Volkswagen was said to pull out of the talks in favour of "other priorities", while Proton's stock market value fell by five percent as a result.

The two carmakers had previously held talks to discuss the development of a strategic partnership, with the first meeting back in October 2004. The discussion fizzled out in January 2006, and collapsed totally in November 2007. The German automotive powerhouse and the Malaysian carmaker resumed talks recently, but have once again failed to reach a successful conclusion.

The dip in Proton's stock market share value showed a lack of investor confidence in the Malaysian carmaker's ability to grow and develop. "Proton's need for a strategic partner to leverage on to enter the global export market is crucial at this juncture before Proton gets further left behind by the competition," research firm OSK Research was quoted as saying.