China replaces Japan as No. 2 vehicle market amid car boom

China surged past Japan to become the world's No. 2 vehicle market after the United States last year as car purchases by newly affluent drivers jumped 37 percent, the Chinese auto industry association said Thursday.

The announcement highlighted China's lightning evolution from a "bicycle kingdom" into a major auto market where foreign producers are racing to open factories and target a growing urban middle class.

Struggling U.S. automakers General Motors and Ford have gotten a boost from double-digit sales growth in China and fledgling Chinese manufacturers are starting to export their own cars, trucks and SUVs.

"There's money here and people spend that money on cars," said Michael J. Dunne, vice president for Asia-Pacific for auto research firm J.D. Power and Associates. "The Chinese government has made no secret of its intention to develop a car culture and a car industry. All of the forces are working together."

China's overall vehicle sales, including trucks and buses, rose 25.1 percent to 7.2 million units last year, China Association of Automobile Manufacturers said. Passenger car sales rose to 3.8 million, it said.

Japan's total vehicle sales last year came to 5.7 million units, a slight decline from 2005, said the Japan Automobile Manufacturers Association.

U.S. car and truck sales totaled 16.5 million units last year, down a bit from 2005, according to research firm Autodata Inc.

The Chinese car boom is driven by economic growth that is estimated to have reached 10.5 percent last year.

The officially endorsed car culture has changed the Chinese landscape almost overnight, with ancient city centers bulldozed to make way for broad avenues and the government spending heavily to build a nationwide highway network. Big cities are ringed by car dealerships. Fast food restaurants are opening drive-through windows.

The car craze has taken a toll in smog and congestion. China has most of the world's 10 dirtiest cities, and air quality is worsening as car exhaust increases. Rush-hour traffic slows to a crawl in Beijing, Shanghai and other urban centers.

China could overtake the United States as the top car market some time after 2015, Dunne said.

"It could happen," he said. "China's annual income per person is just over US$1,000 (Ђ700), and they're buying 7 million vehicles. Imagine what happens when that goes to US$2,000 or US$3,000."

Red-hot Chinese sales have brought relief to U.S. automakers, which have seen weak demand at home.

General Motors Corp. said Monday that its total sales in China last year rose 32 percent over 2005 to 876,747 vehicles. Ford Motor Co. said sales of its brands, including Ford, Lincoln, Jaguar, Land Rover and Volvo, rose 87 percent to 166,722 units.

European and Japanese automakers report similar surges. Luxury auto maker Rolls Royce, owned by Germany's BMW AG, says its 2006 sales were up 60 percent. The company is expanding its work force to meet Chinese demand for its 200,000-pound (US$380,000; Ђ290,000) luxury Phantom.

China's biggest-selling automaker last year was Shanghai General Motors Corp., a GM joint venture, with 365,400 vehicles sold, according to the Chinese industry group.

The top-selling car was the Jetta, made by FAW-Volkswagen Co., one of Volkswagen AG's joint ventures.

The biggest Chinese manufacturer was Chery Automobile Co., with 272,400 units sold. Chery and DaimlerChrysler AG announced a plan last month for the Chinese company to make small cars for sale worldwide under the Dodge, Chrysler or Jeep brands, reports AP.

China's automakers exported about 325,000 vehicles last year, about 80 percent of them low-priced trucks and buses bound for developing markets in Asia, Africa and Latin America, the government says.

They also are eager to break into the U.S. market, though analysts say they will have trouble meeting safety and environmental standards.

This week at the Detroit Auto Show, China's Changfeng Motor Co. displayed a pair of sport utility vehicles and two pickup trucks ahead of what it said were planned exports to the United States.

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