The race is on for a slice of China's booming auto market, with major Japanese carmakers investing heavily to make up for their late entry behind pole position holder Volkswagen, analysts say.
Honda Motor Co Ltd, Toyota Motor Corp and Nissan Motor Co Ltd recently announced plans to expand auto production in China and strengthen ties with local firms to meet surging demand as living standards there improve.
Risks such as competition from foreign rivals and logistical problems are high, but potential rewards are too good to miss.
China boasts the world's fastest growing auto market, with car sales this year expected to hit 1.2 million units and surge to about 5.5 million by 2010, said Koji Endo, auto analyst at Credit Suisse First Boston.
"In the future it will be a veryimportant market," Endo said.
Japanese automakers control a quarter of the market, which is not very high, he said.
"But as the demand rises that market share should also go up," he added, though German and American automakers are also competing for larger shares of the pie.
Honda, as the first of Japan's auto giants to enter the market, is the most successful, having forged good relationships with local producers. Toyota and Nissan have also pumped money into their Chinese operations.
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