When China joined the WTO a year ago, its car industry - uncompetitive and without economies of scale - was expected to be one of the biggest losers. But it has not turned out that way. Sales have soared to record levels this year, with domestic manufacturers the big winners, while the share of imported cars has gone down. 'Many thought that China's auto industry would not be able to withstand the impact of WTO entry, but it has been a banner year,' boasted the Economic Daily yesterday. 'Output has reached record levels and we have become the sixth biggest producer in the world. Consumers have been reaching into their pockets to find the money to pick the models they want. A 'China strategy' has become an important part of the global strategy of the multinational producers.' Volkswagen, which has two joint ventures in China, said last week its sales had increased nearly 40 per cent over the past year and would exceed those in the US for the first time. Several other global producers, including Nissan, Toyota, Honda and Hyundai, announced major investments in China, mainly aimed at the domestic market. According to official figures, in the first 10 months of the year, domestic production rose 35.6 per cent to 2.67 million, including 908,000 passenger cars - an increase of 51.7 per cent. In the same period, foreign imports amounted to 100,334 vehicles, up from 64,582 on the same period last year. 'China feared WTO entry would have a big impact on its auto industry,' says Professor Hou Ruoshi, of the International Affairs Institute at Tsinghua University. 'But, over the last year, we can see little impact. 'The influence of foreign passenger cars is small. What has happened is that foreign automakers have brought their technology and are making cars here. Wages are low and technicians have had 40 years of experience, giving foreign firms a high profit. If we look at history, WTO entry has not badly hit the economy of a developing country. India is a good example.' The multinationals have decided that to sell to this market, they must rely on domestic production and not imports, despite the tariff cuts on January 1 this year that followed WTO entry. The tax on a passenger car of less than three litres, for example, fell from 70 per cent to 43.8 per cent. The cost of a Mercedes 600, a favourite of bosses of private firms, fell to 1.1 million yuan (HK$1.03 million). Prices of imported cars fluctuated sharply this year, in part because China retained a quota system for imports. Ahead of WTO entry and expecting a surge in demand, dealers imported a large number at the end of last year. But demand was not so strong and they were forced to cut prices. By the second quarter the supply of import quotas began to dry up, forcing dealers to pay up to 80,000 yuan for a quota on the black market, and prices went up. In the third quarter, a more expensive Euro and Japanese yen also pushed up prices.