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A model poses beside an Audi TT 2.0T at the Beijing International Automotive Exhibition, November 19, 2006. Volkswagen's premium brand Audi expects China to become its second largest market after Germany in two years, up from fourth, as a growing number of wealthy mainlanders pick the established brand. [Reuters]

Some luxury automakers, including Daimler Chrysler, BMW, Audi and Volvo, have set up assembly lines in the country in order to take advantage of lower production costs.

Volvo CEO Fredrik Arp predicts that five years from now the Chinese market for luxury cars will develop to the point that sales will be growing at an annual average rate of 60 percent.

Sales of luxury sports cars are booming in China and the country is expected to be Ferrari's fifth or sixth largest market within three to five years, said Mirko Pietro Bordiga, general manager of Ferrari China.

It is estimated that only five percent of the Chinese can currently afford private cars, but that translates into 65 million people given the huge population.

Vehicle sales are expected to reach seven million in 2006, including four million sedans and 320,000 luxury vehicles.

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