Some 4.1 million passenger cars are expected to be sold in China in 2008, around double the current level and not far behind a projected 4.6 million units sold in Japan by that time.

By the end of the decade, said Thomas Stanley, director of Financial Advisory Services in China for KPMG, China is expected to catch up with Japan.

"That's an annual growth rate of around 14 percent in the next four years (for China)," Stanley said.

KPMG forecasts around five million passenger cars being sold in China by the end of the decade. Last year, 2.3 million units were sold in the country.

While China will experience booming car sales, Japan's market will likely stagnate over the next several years due to the prospect that the economy will remain weak.

Some 4.7 million passenger cars were sold last year in Japan, Asia's biggest auto market.

For 2005, however, China's auto market will continue to be plagued by reduced demand and further price cuts due to tight credit conditions and competition.

Domestic demand for passenger cars slowed markedly in 2004 after Beijing implemented credit-tightening measures in a number of sectors to help stop the economy from overheating.

The industry's sluggish performance hit hard the 2004 earnings of vehicle manufacturers.

Net profit at Brilliance China Automotive Holdings Ltd (CBA), which produces BMW cars in China, plunged 95 percent year-on-year in 2004 to 46 million yuan (US$5.56 million). Great Wall Automobile Holdings Co's bottom line declined by 23 percent in the same period.

"There is still heavy pricing pressure in the market, and this will last until there is some kind of a shakeout in the industry with producers scaling back or exiting the market," said Stanley.

(China Daily April 29, 2005)