Japanese brands topped sales lists in the Chinese auto market last year as Japanese carmakers increased their investment in China and brought out a raft of new models in a scramble for market share.

About 983,600 sedans were sold under Japanese brands in China last year, more than a quarter of the country's sedan sales of 3.83 million, according to a report by the China Association of Automobile Manufacturers.

Sales of Chinese indigenous brands came within a hair's breadth of their Japanese rivals with 982,800 units. European and American brands followed.

Back in 2001, European brands held 53.8 percent of the market, the Japanese had 15 percent and the Americans trailed with 8.1 percent.

But hot competition among multinationals and a vigorous domestic industry have contributed to a very different situation in 2006. The Japanese have their nose in front with 25.69 percent, Chinese brands are in hot pursuit with 25.67 percent, European brands have dropped to 24.44 percent and American brands risen to 14.17 percent, according to the report.

Japanese carmakers are latecomers to manufacturing in China, the world's second largest car market after the United States, with 7.22 million new vehicle sales a year.

But Japanese brands have gained market share by tuning in to the needs and aesthetic preferences of Chinese buyers, said analysts with the China Automotive Technology and Research Center, citing Honda Accord as an example that was introduced into China to fill the gap in the market for high-end private cars.

Rather than wait for sales of old models to slump, Japanese carmakers proactively ushered in new models to keep up with changing market demands.

They sharpened their competitive edge by lowering production costs and undercut their rivals in the Chinese market by making use of the country's cheap labor, said analysts.

The newest Toyota Camry manufactured by the Sino-Japanese joint venture Guangzhou-Toyota was priced at between 190,000 yuan (24,360 U.S. dollars) and 260,000 yuan when it was launched last year, over 100,000 yuan cheaper than the imported model.

The booming sales of Japanese brands are also attributed to their positive image associated with energy savings and high performance, said analysts.