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yes, the flashing light is the alarm. once you open the door manually with the key, you have 10 seconds to start the car or the alarm will sound. if alarm sounds, just start the car and it will stop. it sounds like your key battery contact is weak or faulty. some people cut "squares" of ziplock plastic and place several "layers" of plastic inside the key head to improve battery contact. give it a try. anyway, your key can still manually open the door and start the car. new key head at dealer is expensive and requires programming (around $200 or so total).
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