As fears of overcapacity in the Chinese car market grow with every expansion announcement, big car makers would only express optimism as they outlined their China plans at a motor industry conference in Tokyo, Reuters reported.

Executives at Volkswagen, Toyota and Honda said they would continue to raise output capacity -- which already exceeds sales on an industry-wide basis -- as they count on explosive economic growth to foster new demand, the report said, noting that China's car sales soared 60% last year to 1.2 million, making it the world's fastest growing major car market.

But many analysts have warned that the rapid expansion by foreign car makers would lead to a glut soon, threatening to reduce prices and making operations in China less profitable, Reuters added, noting that foreign car makers are planning to spend $US10 billion in China in the next few years to chase exploding demand, even though the Chinese government has decreed that local manufacturers would have half the market by 2010.

According to the news agency, consensus estimates put car sales at around six million units by the end of the decade, meaning foreigners would have to share a three million market at that point if the government's goal is achieved.

Reuters noted that Volkswagen wants to hold on to its dominant position with about 40% of the market, and Toyota recently said it wants 10% by 2010 from just over 1% this year - a target higher than the current share held by number two player General Motors.

If VW, Toyota and the Chinese government all have their way, that would leave nothing for other foreign car makers, Reuters said.

"Everybody seems to think it's somebody else's problem," Graeme Maxton, managing director of auto consultancy Autopolis, told the news agency, adding: "With almost all other industries that entered China, it's always been the same story: foreign companies bring in the technology, Chinese companies take over the market and in the end there's a supply glut."

Maxton noted that the imminent oversupply situation doesn't take into account any unknown investment plans, mostly from local car makers.

Reuters noted that motor industry consultants at KPMG's Financial Advisory Services said recently that while car sales jumped 77% from January to July this year to 998,000 units in China, capacity is expected to hit 2.7 million units this year. By 2005, overcapacity is expected to rise to 2.3 million units or 90% of forecast sales, it added.

In another sign of looming overcapacity, China's State Statistical Bureau said last month car inventories rose more than 60,000 units in the first seven months of the year, a rise never seen in any comparable period, Reuters added, noting that this left 14 of China's most important car makers sitting on goods worth 22.08 billion yuan ($2.67 billion), though the State Information Centre did not name the car companies.

Walter Hanek, managing director of Volkswagen Group China, acknowledged to Reuters that overcapacity and ensuing price falls could be an issue one day, but expressed the industry's mantra that it was more risky not to enter the market.

"We all agree the upcoming opportunity in China outweighs the risks in the near term," he reportedly said on Monday.

Carlos Ghosn, chief executive of Japan's Nissan Motor also commented on Tuesday at the same event, Reuters said.

"As a consequence (of high growth and high profitability in China), everybody is going to go there. Are we going to have overcapacity? At some point, probably, but I don't think it is imminent," he reportedly said, adding he saw no reason for China's rapid growth to stop in the next four to five years.

But, Reuters said, even Miao Wei, chief executive of China's Dongfeng Motor, which has an extensive alliance with Nissan, cautioned that competition was heating up fast and that foreign makers would have to take a long-term view of the market to be successful.

"It's dangerous to be speculative and look for short-term gains," Wei reportedly said on Monday.