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Last Updated: Tuesday, 19 April, 2005, 06:39 GMT 07:39 UK
Car giants race for China sales
A worker fits doors on cars at a factory in Hainan
Chinese car sales have more than doubled since 2003
Competition is heating up between giant carmakers for a bigger share of China's fast-growing market.

General Motors, the world's biggest auto firm, said on Tuesday that it expects a fierce price war with its rivals to intensify.

Results from the firm, expected later on Tuesday, are expected to show growth flagging elsewhere in the world.

GM says it will invest $3bn to double Chinese production by 2007, while Ford has announced a new engine plant.

Ford's new venture in the eastern city of Nanjing is a joint operation with Chinese firm Changan and Japan's Mazda.

It will supply a neighbouring manufacturing plant, the construction of which started in January.

Reliance on loans

For all main carmakers, China - now the third biggest car market after the US and Japan - is seen as a key prize in a world of stagnating sales and falling profits.

Big US car firms are now relying on finance - both loans to buy cars and general financial products - to stay in the black and offset losses from vehicle sales.

The hunger for automobiles shown by the several hundred million inhabitants of China's cities have been seen as a lifeline.

But sales growth is tapering off there too, the latest figures show.

GM said it saw sales in the three months to June rise 8.3% to 132,401 vehicles, giving it a 10.4% market share.

Volkswagen remains the leading foreign seller, with several Chinese marques well ahead of that.

Overall, however, vehicle sales in the first quarter were down 1.16% on the same period the year before at 1.27 million - with car sales in particular dropping more than 3%.

In 2004, car sales rose 15% after doubling the previous year.

However, since then the government has responded to soaring energy costs, an overheating economy which is growing at more than 9% a year, and worries about a rise in bad debts by tightening the rules on credit.

What next for Shanghai Automotive?
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