KUALA LUMPUR, Malaysia (AP) _ After a sputtering start, the Proton Saga is rolling in the fast lane as Malaysia's national car and is beginning to make a name for itself elsewhere.

The 5-year-old company - a joint venture with the Mitsubishi automaker of Japan - recently announced it would increase production this year by 10,000 cars to 90,000. A new limousine model is to be introduced.

Proton sold 52,700 cars last year to capture 66 percent of the domestic passenger car market in Malaysia, an emerging ''dragon'' that is rapidly becoming a significant Asian economic power.

Eager Malaysian buyers now wait two to four months for delivery. Some grumble that they must accept extra accessories to ensure quick delivery.

The Proton once was derided as a Mitsubishi assembled in Malaysia with parts supplied totally by the Japanese partner. But the Proton now boasts 65 percent local content and hopes to reach 80 percent by 1992.

Plans to enter the U.S. market remain on hold, partly because a distribution agreement remains stalled. The car also could have difficulting meeting tough American antipollution requirements.

But business is booming in Britain where the Proton Saga outsold Mitsubishi itself in March and surpassed its two main competitors, the SEAT from Spain and South Korea's Hyundai.

The Saga was created at the behest of Prime Minister Mahathir Mohamad as a vehicle for national pride, a symbol of Malaysia's economic transformation from a Third-World producer of rubber and tin.

It was rolled out of a plant near Kuala Lumpur with much fanfare. Though it initially contained mostly Japanese parts, the car emerged as the focus of a ''buy Malaysian'' campaign that extolled the virtues of local products.

Economic recession hurt early sales. Then costs soared as Malaysia's currency depreciated sharply against the yen, which made Japanese components of the car much more costly.

While imbued with patriotic fervor, nobody pretended the four-door subcompact was the last word in automotive design. Essentially a Mitsubishi Lancer Fiore, it is available with 1.3-liter and 1.5-liter engine sizes.

The main feature that distinguishes it from its Japanese antecedent is a hood ornament light bearing the crescent moon and star displayed on Malaysia's flag.

Malaysia has been home to a budding auto industry for years, consisting mostly of assembly companies that put imported kits together. For a time these assemblers posed a formidable competitive challenge to the Proton venture. But Malaysia's government intervened to help.

The National Automobile Industry (Perusahaan Otomobil Nasional, which suggested the acronym Proton) does not have to pay the 40 percent import duty for parts imposed on other assemblers. This has made the car cheaper to buy and therefore more attractive.

The 1300cc Saga costs about 26,000 ringgit, or about $9,630, compared with the 30,000-34,000 ringgit price range of comparable cars.

Other assemblers responded by reducing output and concentrating on trucks or higher priced cars that don't compete directly with the Saga.

Proton Managing Director Kenji Iwabuchi said that while it is Proton's objective to sell quality products at reasonable prices, protection is necessary to establish the national car.

Iwabuchi and several other Mitsubishi executives were brought in two years ago to replace Malaysian bosses after ambitious plans to penetrate the U.S. market had stalled.

In late 1986, Proton awarded exclusive U.S. distribution rights to a subsidiary of Bricklin Industries, Inc., which introduced the Yugoslav-built Yugo and the Japanese Subaru in the United States. Bricklin's Proton America unit agreed to import as many as 40,000 Sagas a year when sales reached full throttle.

Delivery target dates were repeatedly missed due to technical and financial setbacks. Plans to ship Sagas to America are on indefinite hold, Proton executives have said.