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Volkswagen Likely to Come Out on Top in China Car Sales

Trey Thoelcke

Volkswagen has said that it aims to be the largest carmaker in the world. And for the first time in nine years, it appears to be set to come out on top in sales in the world's largest car market -- China.

Both VW and its main rival in the People's Republic, General Motors Co. (GM), have sold more than three million vehicles there this year. But the German automaker holds on to a narrow lead. They are trailed by Ford Motor Co. (NYSE: F) and Toyota Motor Corp. (TM).

All four companies have their hearts on a bigger piece of the pie in China, investing a combined $36 billion in the nation. Despite competition from Chinese automakers, as well as lawmakers likely to take drastic measures to rein in air pollution in China's major cities, the world's largest automakers are desperate to offset dreadful sales and earnings results in Europe.

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The rise of VW could hit GM particularly hard, both in terms of reputation and in earnings. GM said it was looking to introduce four new Chevrolet models in China next year, as well as to expand its low-cost Baojun brand. Chinese buyers could already be looking elsewhere though, given the rise of VW and of Tata Motors Ltd. (TTM), which sells cars under the Jaguar and Range Rover brands. Sales of Tata vehicles have risen sharply in the past year, and the company is set to begin producing cars in China.

VW perhaps needs China more than its largest rivals, not only to offset weak results in Europe, but because it sells so few cars in the United States, the next largest market in the world. Its U.S. sales are down around 5% this year, and Subaru has sold more cars there than VW.

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