General Motors wants to displace Volkswagen AG as the leader in China’s car market.

“We believe GM can ultimately claim the largest share of this growing market,” chairman and CEO of General Motors China Group, Phil Murtaugh, told Automotive News Europe.

The stakes for both companies are huge, given China’s explosive growth.

VW sold more cars there last year than in Germany. “We also made more money” in China than in Germany, said VW executive vice president and member of the board of management, technical, Barthel Schroeder.

“By 2008, we expect China will be the most important market for the total VW Group.”

Last year, China was GM’s fourth-largest market. “It probably will pass Canada and the UK to become the second-largest this year,” said Murtaugh.

GM’s China profits tripled in 2003 to $US437 million, or 40% of GM’s global automotive profits.

VW said it aims to retain 30% of the market. VW’s passenger car market share already has dropped to 29% so far this year, though, from 59% in 1998, according to market research firm Automotive Resources Asia Ltd.

GM’s market share is about 13%, up from less than 1% in 1998.

The next-largest foreign carmaker in China is Honda Motor Co., with between 4% and 5%.

GM’s latest salvo against VW involves a further rapid expansion of capacity in several segments of the market. GM’s vehicle capacity at its various joint ventures will jump from 530,000 now to 1.3 million 2007. In November, GM had said it would raise capacity to 865,000, but now it is adding even more.

VW, though, is not standing still. It plans to double its capacity to 1.6 million by 2008 by expanding capacity in both Shanghai and Changchun. It will also build new engine plants in Shanghai and Dalian, and expand an existing one there.

It may be too late for VW to beat back GM, however. GM’s sales grew by 137% in the first quarter of 2004. Meanwhile, VW’s sales rose by an anemic 5% compared to the same quarter in 2003. The total market grew by almost 45%.