"In the morning loop, we had to adapt to the conditions and our pace notes were a bit slow in places. From there, we started to enjoy the car and the stages more.
"We've been consistent, had good pace and that's allowed us to stay in touch with the leading three. We've now got to build on this over the next two days."
Championship leader Theirry Neuville dropped time as first car on the road but made a mistake on the fifth stage that put him further behind. He starts day two almost two minutes behind the leader in 10th place but more important nearly a minute behind championship rival Sebastien Ogier.
Ogier is sixth in his M-Sport Ford.
Meanwhile fellow Kiwi David Holder had a slightly disappointing day competing in the Junior World Rally Championship.
The 2016 New Zealand Rally champion holds eighth place in his class out of a total of 12 competitiors.
"We came here expecting to have a bit more speed as we felt this would be more similar to New Zealand roads. They are similar in many respects, but they also have lots of ruts which I'm still struggling with unfortunately.
"A bit of an up and down day, including possibly the worst stage of my life – we almost got stuck on the start line because of some big ruts, then at the finish of the stage, I got confused where the start was and stopped too early.
"So not so good on the stage times today, but we did have a clean day and didn't make any mistakes from a driving perspective.
"Tomorrow we'll try and drive with a bit more confidence and hopefully the times to improve. Still two days to go and more learning to be had."
Standings
1. Ott Tanak (Toyota)
2. Mads Ostberg (Citroen) +5.8s
3. Jari-Matti Latvala (Toyota) +23.1s
4. Hayden Paddon (Hyundai) +36.4s
5. Teemu Suninen (M-Sport Ford) +46.1s
6. Sebastien Ogier (M-Sport Ford) +58.9s
7. Elfyn Evans (M-Sport Ford) + 1:01.1s
8. Esapekka Lappi (Toyota) +1:01.4s
9. Craig Breen (Citroen) +1:34.1s
10. Thierry Neuville (Hyundai) +1:57.7s