Automakers See China As Big Growth Engine; Overcapacity A Risk.(A)

Byline: MARILYN ALVA

From the flurry of recent news put out by global automakers, all roads seem to lead to China.

Despite warning signs such as potential overcapacity, auto giants say they can't ignore surging demand in the world's most populous nation.

In recent weeks, Ford, General Motors, DaimlerChrysler, Volkswagen, BMW, Volvo, Toyota, Honda and Nissan, among others, said they would expand their presence in China. They're adding plant capacity, bringing out new models and inking new or expanded deals with local partners.

Fueled by China's growing yuppie class, passenger car sales surged 69% in the first nine months of 2003. Over 4.3 million vehicles are expected to sell this year, including 1.9 million sedans.

Urban consumer spending is growing about 14% annually, KPMG estimates. Reports indicate that by 2010, 10 million to 15 million Chinese households, in a population now at 1.3 billion, will be affluent enough to buy a car.

The outlook in China, where car customers are mostly first-time buyers, looks especially appealing compared with auto firms' mature home markets.