China's commercial vehicle market is expected to sustain double-digit growth in coming years while exports expand, consultancy KPMG said on Thursday, despite shrinking in 2005 when China imposed controls on construction and investment.

Extensive road projects, increased urbanisation, and heavy reliance on public transportation in the world's fourth-largest economy should drive the industry, KPMG said in a report on China's commercial vehicles industry, a category that excludes sales of consumer passenger vehicles.

About 2.5 million commercial vehicles were sold in China in 2005, down slightly from 2.6 million in 2004. But in the first half of 2006, sales amounted to 1.5 million, on track to surpass last year's total.

Although many Chinese automakers have partnered with foreign manufacturers -- from BMW A.G. to Volvo -- in joint ventures, homegrown manufacturers still control the lion's share of the domestic market.

In 2005, China exported around 120,000 vans, trucks and buses -- an estimated US$1.17 billion -- to over 70 smaller markets in the Middle East and Africa, signaling global demand for Chinese vehicles. KPMG would not give a forecast for 2006.

"It's true that Chinese companies continue to dominate the commercial vehicles sector," said Thomas Stanley, a partner for KPMG in China. "But as exports become more of a growth driver, this could create opportunities for foreign companies."

Stanley said Chinese automakers such as Beiqi Foto, Dongfeng Motor Group Co. Ltd., and China National Heavy Truck, needed to develop overseas distribution and service networks, meet overseas safety standards, and develop brands to compete in Europe and the United States.

"In a way, they've captured the low-hanging fruit of the easier markets to access," Stanley said.

"But going forward, the challenge is going to be tapping into markets where they don't meet these standards."

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