The Malaysian government says Proton models are now selling well

The state-controlled Malaysian firm will now continue to go it alone, said the government. The carmaker has also ruled out any deal with General Motors.

The news surprised analysts, with some questioning if Proton has a long-term future without a Western partner.

Proton recently announced a 591m ringgit ($169m; �82m) annual loss.

Higher domestic competition

Malaysia's Second Finance Minister Nor Mohamed Yakcop said the government felt Proton should be given the chance to return to profitability on its own.

We cannot hide our disappointment of the outcome of the talks TA Securities analyst Ikmal Hafizi

Government officials pointed to the success of Proton's most recent models, and said the firm was committed to increasing exports and to lifting its domestic market share from the current level of 31%.

However, analysts remain far from convinced that Proton can succeed in the long-term on its own.

They point to Malaysia's recent lowering of duties on foreign cars following a regional trade agreement, and that as a result more Malaysians were buying imported vehicles.

"We cannot hide our disappointment of the outcome of the talks," said TA Securities analyst Ikmal Hafizi.