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VW will battle GM in 2013 for market dominance in China

Yang Jian is managing editor of Automotive News China

SHANGHAI -- After experiencing volatile swings for four years, China's car market is geared toward stable growth in 2013.

And Volkswagen is poised to dominate it.

Even before anti-Japanese protests erupted in China in September, VW was starting to lure Chinese consumers away from Toyota, Honda and Nissan in the mid-sized car market.

VW has done it with advanced powertrain technology such as turbocharged direct injection engines and dual-clutch gearboxes.

While sales of Toyota, Honda and Nissan slumped about 30 percent in November, Volkswagen brand sales in China jumped 31 percent.

The Japanese automakers will recover gradually as anti-Japan sentiment in China subsides, but Volkswagen isn't going to back away from its bid for dominance.

The company is spending heavily to introduce new models, build new assembly lines and open new dealerships. In November, VW's group sales in China were estimated at 270,000 units, just ahead of market leader General Motors, which sold 260,000 units.

In the first 11 months, GM's joint ventures sold 2.59 million units in China, while VW Group sold 2.53 million units.

So General Motors clings to a slender lead for the year to date, but more than a million of its sales have been low-margin Wuling microvans. So it looks like Volkswagen has the momentum.

Stabilizing growth

But what kind of sales environment will Volkswagen, GM and the other automakers encounter in China next year?

Normally, China's car market grows faster than its economy. That pattern was disrupted in 2008 when global economic woes made Chinese consumers hold tight to their wallets.

After a series of ups and downs -- fed by the government's on-again, off-again sales incentives -- China's car market appeared ready to stabilize this year.

From April to August, passenger vehicle sales grew more than 10 percent, but the market was disrupted when a territorial dispute over some islands in the East China Sea caused Chinese car buyers to boycott Japanese cars.

Once again, the market has bounced back; in November, passenger vehicle sales rose 9 percent year-on-year.

So what can we expect in 2013? The economy is expected to grow 8 percent next year and China's car market is likely to outperform the economy.

With no quick solution seen to the ongoing territorial dispute between China and Japan, sales of Japanese brands in China will remain subdued.

That will leave Volkswagen and General Motors free to continue their battle for market dominance. It should be an entertaining free-for-all.

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