Dominance of General Motors appears to be under threat.

After trailing General Motors in China for eight years, Volkswagen AG edged ahead in the third quarter, putting it one step closer to its goal of becoming the world's biggest automaker.

VW's deliveries in the country jumped 21 per cent last quarter, almost triple GM's growth, to 704,991 vehicles, according to figures the company reported this week. That beat the 664,765 that GM reported earlier this month.

At stake is supremacy in the world's biggest auto market, which analysts say will likely exceed those of the US, Japan and Germany combined three years from now.

"Being No1 in China means a lot to their global development," said Harry Chen, an analyst with Guotai Junan Securities in Shenzhen.


"Volkswagen and GM will go through a period of time fighting at close quarters in China and they may take turns grabbing the lead."

Though the comparisons aren't perfect - VW counts Hong Kong and Macau and excludes trucks, while GM does the opposite - Kevin Wale, GM China's outgoing president, yesterday confirmed that his company had ceded the top spot for the quarter.

Volkswagen declined to comment.

With only one quarter left, GM's lead of about 77,000 units may be enough for the company to hang on to the annual China sales crown.

The Buick Excelle and Chevrolet Sail were the top two selling cars in China for the first nine months, while VW's top seller, the Jetta, ranked fourth, according to the China Association of Automobile Manufacturers. VW had five of the 10 best-selling cars through September, while GM claimed three spots, according to CAAM.

Volkswagen introduced new versions of its Lavida and Audi A4L sedans in the third quarter, and benefited from a territorial dispute that fuelled so much anti-Japan sentiment that Toyota and Nissan saw their September sales in China tumble the most since at least 2008.

With more refreshed models in showrooms just as Chinese buyers have turned away from Japanese brands, Volkswagen has been better able to capitalise on the tensions than GM, said Steve Man, a Nomura Holdings analyst.

Volkswagen is also expanding production capacity faster - 38 per cent growth this year versus GM's 26 per cent, JPMorgan Chase & Co. estimates.