Both firms have seen record robust sales growth for their joint ventures during the first quarter of this year, dwarfing those of former market leading companies from the United States and Germany, according to an industry organization.

Beijing Hyundai, the South Korean car producer's venture with Beijing Automotive Industry Holding Corp, and Guangzhou Honda, the Japanese firm's venture with Guangzhou Automobile Group, became the top two car sellers in China between January and March, the China Association of Automobile Manufacturers said yesterday.

Beijing Hyundai sales skyrocketed by almost 160 per cent year-on-year to 56,100 cars over the period.

Guangzhou Honda sold 45,000 cars in the first quarter, an increase of 58 per cent from a year earlier.

By contrast, sales at the joint ventures of German Volkswagen and US General Motors (GM)- the top car manufacturers in China last year - tumbled in the first quarter of this year, the auto association said.

Sales at GM's venture with Shanghai Automotive Industry Corp (SAIC) slumped by 35 per cent year-on-year to 44,500 vehicles in the period, ranking third in the country.

Volkswagen's venture with SAIC, the top car seller in China last year, sold 36,139 units in the period, dropping the firm down to No 6.

The German car maker's venture with First Automotive Works Corp declined from No 2 last year to ninth, with sales of 30,074 cars.

"Beijing Hyundai and Guangzhou Honda already showed much stronger growth momentum than their rivals last year. Their small and medium-sized products are more attractive than others in many aspects, such as prices, fittings, fuel economy and appearance," said Yale Zhang, the Shanghai-based analyst at US auto consulting firm CSM Worldwide Corp.

The Hyundai venture's 1.6-litre Elantra was the best-selling single car model in China in the first quarter of this year, according to the auto association.

The venture sold 38,500 1.6-litre Elantras in the period.

"Japanese and South Korean car makers do much better than US and particularly European rivals in cost-controlling," said Qian Pingfan, an industrial economist at the State Council Development and Research Centre. "They have more room to cut prices."

Car makers have all been forced to slash prices this year to boost sales.

However, it is hard to say that Beijing Hyundai and Guangzhou Honda will be able to maintain their current top positions as their products will have strong head-to-head rival models to be launched in China this year, such as Suzuki's Swift, Tiida of Nissan and Chevrolet Kalos," Zhang told China Daily.

Car sales in China have slowed down sharply since April last year following sensational growth in 2003 and 2002.

Sales at 39 car firms in China declined by an average of 7.69 per cent year-on-year to 574,300 units overall in the first quarter of this year, although they sold 256,000 units in March, surging 72.79 per cent from February.

Jiang Lei, vice-chairman of the auto association, has previously predicted that demand for cars will grow by 15 per cent to about 2.6 million units this year, from 2004.

But Zhang went even further, saying demand growth could reach 20 per cent.

(China Daily April 8, 2005)