Home brands play big

    But in the home market, Chinese automakers are proving increasingly formidable competitors. After practically disappearing before an onslaught of foreign-dominated joint ventures in the 1990s, Chinese brands have recovered and now hold a quarter of the domestic market.

    To gain market share, Chinese automakers have become masters at controlling costs and holding down prices. Some of the savings, particularly in the 1990s, have come by imitating Western designs. But most of the savings have come from inexpensive labor at every stage in the production process.

    Cost controls have become increasingly important as the original heart of the Chinese marke-selling luxury sedans to companies and wealthy families ¡ª has been far surpassed by the sale of affordable compacts and subcompacts, with no sign this trend will stop.

    "The demand will tend to shift toward fuel-efficient and middle-class vehicles," said Xu Ping, chairman of Dongfeng Motor, one of the largest automakers in the country.

    The Chinese market is on course to reach almost 6.8 million cars and light trucks this year, more than the Japanese market, although a larger share of the Chinese market consists of small commercial trucks.

    By comparison, the United States is on track for sales of almost 16.7 million cars and light trucks this year. For the 18 countries of Western and Central Europe, total sales are coincidentally also expected to be 16.7 million this year, with 3.6 million to be sold in Germany and 2.5 million in France.

    Automotive Resources Asia, acquired this autumn by J.D. Power & Associates, forecasts that sales of cars, minivans and sports utility vehicles in China will roar past such sales in Japan next year; US$74 billion worth of these vehicles are being sold in China this year, up from US$55 billion last year.