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Rich pickings for China

The striking little yellow Dongfeng D120 was a star at this week's Beijing motor show, the largest auto show in the massive Chinese market.

The D120 was one of 15 cars at the show from Dongfeng, a major Chinese manufacturer. It has joint ventures with Citroen, Nissan and Honda.

The show opened last Sunday amid rocketing sales with few signs that growing traffic congestion, pollution and rising oil prices were clouding the future of the industry.

While international producers unveiled their latest products, the Chinese were displaying more than 180 domestic-made vehicles. Many of them are hoping that their inexpensive cars may one day find their way into global markets.

Australian importer Ateco is looking at bringing Chinese-made cars Down Under within the next two years.

Cars like the Geely, Great Wall, Chery and Red Flag are enjoying an almost 25 per cent market share in China, according to Xinhua news agency reports this week.

After years of growth, China is the world's second largest car market after the US.

In the first 10 months of 2006, 5.89 million cars were produced and 5.77 million cars sold in China, figures up 27 per cent and 26 per cent respectively from January-October 2005, according to the China Association of Automobile Manufacturers.

If this trend does continue, China will have 100 million cars on its roads by 2020, up from

43 million in 2005, a phenomenon that will cause severe pollution unless stricter emission controls are implemented, Xinhua says.

More than 500,000 potential car buyers are expected to attend the 10-day show, many of them first-time buyers.

International prestige brands are at the show keen to sell to the country's wealthy who are proud, and keen to flaunt their riches.

It is this fast-growing generation of mainly under 35-year-old, self-made tycoons that the world's top luxury carmakers have now firmly set their sights on.

"We have more than 300,000 millionaires in China, so I think it's a good number for us to go into the market," Stephan Winkelmann, president and CEO of Lamborghini, says.

Rolls Royce sales are up 50 per cent from last year and China has become its third largest market after the US and Britain, says Ian Robertson, chairman and chief executive.

"It is growing dramatically. There is a fast growing number of very rich people in this country," Robertson says.

And sales in China, including Hong Kong, at 65 vehicles out of its global total of about 800, represented "nearly 10 per cent of our business," Robertson says.

Porsche, which entered China in 2001, sold 857 cars in China last year and says it expects that figure to double this year.

However, the show also comes as a new report shows there are problems with local production. Defects have been found in 77 per cent of domestically made cars, largely due to a price war forcing manufacturers to cut corners, according to an industry survey which was released this week.

The range of defects, found within six months of the car being bought, involved tyres, airconditioning, brakes, locks and steering wheels, the China Daily newspaper reported, citing as its source the 2006 China Automobile Customer Satisfaction Index.

"The defects are a result of car makers constantly reducing prices and sacrificing quality," the paper quoted Fan Tianshun, director of the China Quality Association, which conducted the poll, as saying.

For every 100 new cars, there were an average of 338 defects, much higher than last year's figure of 246.

On average, China's car prices have dropped about 10,000 yuan ($A1250) per car each year over "the past few years" as manufacturers try to compete in the the booming market, the paper writes.

Defects were more prevalent in cheaper cars in the 30,000 yuan ($A5000) to the 50,000 yuan ($A8240) range, such as China's Geely, Chery QQ and the Changan Alto.

But fewer defects in more expensive cars helped result in customer satisfaction for China's domestically-built automobiles growing by 0.1 per cent so far this year over the figures reported in 2005. The index was based on a poll of 4648 participants in 36 cities this year, the paper reported.