The Edge financial weekly, citing unnamed sources, said the government had reaffirmed its commitment to the European companies despite attempts by Malaysian auto firms to acquire stakes in Proton.

"The assurance came as VW and PSA are confused by the lobbying efforts of the local automotive groups, whether through government channels or the media, and have asked for clarification from the government," a source was quoted as saying at the weekend.

The weekly said a decision would be made by the end of March on a foreign partner for Proton, with bids by Malaysian companies to be considered after that.

The government, through various agencies, owns 59 percent of Proton shares, including a 43 percent stake held by its investment arm, Khazanah Nasional.

Three Malaysian automotive companies -- DRB-HICOM, the Naza group and the Mofaz group -- have expressed interest in acquiring all or part of the government's stake.

The Edge said discussions with Volkswagen and Peugeot were "fruitful", but that proposals for collaboration differed.

Volkswagen intended to acquire a controlling stake in Proton's manufacturing division, which the weekly said could see Proton turn into a manufacturing hub for the German firm, while improving capability.