But SGMW and Dongfeng are not alone in dramatically boosting their production levels and Liuzhou is not the only city benefiting from China's car boom.

All the major Chinese car companies are expanding their production capacities to meet the insatiable demand of domestic consumers and more factories, which not only make cars, but commercial vehicles, engines and components, are being planned across the length and breadth of world’s third largest nation.

Only this month, Volvo, which is now owned by Zhejiang Geely, announced plans to build a new factory in Chengdu, in Sichuan province, with the goal of selling 200,000 cars in China by 2015. The plan is very ambitious considering Volvo only sold 374,000 cars globally last year.

But as car manufacturers make hay as the economic sun shines, some auto experts fear the expansion juggernaut may turn into a motoring manufacturing bubble, the same type of bubble that burst and caused so much grief in Europe and the United States in recent years.

In January, a KPMG survey of 200 auto executives revealed that half are worried about overcapacity in China within five years. The report said research from Bain Co said that China could be capable of producing 40 million cars annually by 2015, and estimated that number was about 35 percent more than that the market could hold.

The cost of unused plant capacity could reduce profits and take away the advantages of producing in China, Bain said. “The industry may have to brace itself for some casualties,” KPMG analysts say.

Ashley Sutcliffe, editor of China Car Times online, agrees that a bubble is forming.

“Too many factories are aiming for a massive 1 million or greater production capacity when in fact they are mostly selling around 75-80 percent of what they are producing at the moment,” he said.

“Most Chinese car companies failed to meet their 2010 sales goal last year, with some just scraping over.

“The major problem is that people are not yet looking to slow growth and most consultants are looking to eternal growth.”

Sutcliffe said estimates show that the Chinese market will still continue to grow but there are factors in the way that might derail or stall the growth, such as “anti-car ownership policies” that are aimed at addressing traffic congestion.

“Even second-tier cities are evaluating the odd/even license number plate restrictions at the moment,” he said.

Another major hurdle for new car buyers is the price of oil, he said.

“Gas prices have broken through 7 yuan ($1) a liter barrier for the first time in history and that is going to squash many people’s automotive dreams in the near future,” Sutcliffe said.

In 2010, for the second consecutive year, China was the world’s largest auto market as vehicle sales jumped 32 percent thanks to stimulus measures and economic growth.

However, as predicted, industry wide auto sales growth slowed in January to 16 percent after China reinstated a 10 percent sales-tax on small cars this year and took away subsidies for vehicle trade-ins in the countryside.

GM announced recently it sold 184,498 vehicles in China in February with deliveries rising 5.8 percent from a year earlier, compared with a 22 percent increase in January, when sales reached a record of 268,071 vehicles.

Despite the slowdown and production bubble warnings, China’s major car companies still believe that factory expansions are a must in a land where millions of families continue to save to buy their first car.

According to the Automotive Industry Development Research Institute of China, the nation has only 40 cars for every 1,000 people, compared to some European countries that have more than 700 per 1,000 people. The exponential growth is no-brainer, carmakers believe.

“If we do not invest in our plants, then we’ll miss out on sales opportunities, which will be snapped up by our rivals,” Bernd Pichler, managing director for Volkswagen in China, said in the KPMG report. “It’s a risk worth taking.”

Volkswagen announced in November last year it will invest $14.8 billion in China over the next five years as the German car giant aims to become the world’s largest automaker, surpassing Toyota in sales and profitability by 2018. And its game plan hinges on building more factories in China.

VW has two joint ventures in China: one with SAIC, in Shanghai and First Auto Works (FAW), in Changchun, the capital of Jilin province in the country’s northeast.

As all international car brands aim for higher sales, their Chinese joint venture partners are expanding their own industrial networks and also developing more home-grown brands.

FAW has production bases in 14 provinces in China involving local brands, trucks, buses and parts. But Changchun is its main auto hub and the company aims to produce 5 million automobiles by the end of 2015, with 3 million vehicles rolling off factory lines in the northern city.

FAW president Zhang Pijie said the company invested 12.9 billion yuan in research and development during 2006- 2010, and plans to increase this figure to 19 billion yuan over the next five years.

“A considerable part of the investment will go to electric cars. By 2015, car sales will exceed 4 million, among which more than 50 percent will be self-developed brands,” he said. “Our third factory is expected to be completed in 2013.”

The tree-lined city of Changchun is steeped in automotive history with FAW producing the first Chinese-made car and truck there when it set up operations in the 1950s. About 50 percent of the nation’s passenger trains are also built in this city of 7.5 million.

Cui Jie, mayor of Changchun, said FAW’s presence was significant for the local economy and the government is committed to do anything to help.

“It’s our responsibility to address any possible external problems for FAW for example, in relation to the land, energy and logistics problems,” he said. “We are trying to provide anything FAW needs to guarantee its development, with the resources of the whole city.”

Shanghai-based SAIC is currently the biggest auto group in China, with a yearly production capacity of more than 3.5 million, and a majority of its sales — more than 2 million — came from joint ventures with Volkswagen and GM.

In 2010, the company sold 1.1 million Shanghai-GM made vehicles and 1 million Shanghai-Volkswagen products, the two bestsellers in the Chinese market.

While SAIC's Wuling minivans and Chevrolet Sparks are made in Liuzhou, its VW factories are located in Shanghai and Nanjing.

“SAIC-VW is the more successful of the two VW joint ventures due to it being located in a strong economic zone surrounded by Zhejiang and Jiangsu provinces, both of which developed extremely quickly under Deng Xiaoping’s opening-up policy,” said Sutcliffe.

In December last year, SAIC signed a deal with the Nanjing government in which it will invest another 10 billion yuan in the next five years to build a new plant.

“By 2015, the company should be able to produce 700,000 self-brand passenger cars, 40 percent of the total output,” Chen Hong, SAIC president, said. “Beginning this year, SAIC will launch three to four new models every year.”

China’s second biggest automaker in 2010 was Dongfeng, which sold 2.61 million cars reflecting a year-on-year increase of 34.6 percent. In 2011, the company plans to produce 2.9 million automobiles, and reach the sales of 380 billion yuan.

Dongfeng, which means “east wind”, is based in Wuhan, in Central China’s Hubei province, and has developed an international following of joint venture partners with Peugeot, Citroen, Kia, Nissan, Honda and Yulon Motors.

The company’s major success has been with Kia, Nissan and Honda, especially in Guangdong province where it has expanded its production facilities and where these marques have gained a major stranglehold on the market. It also has two newer Kia production bases at the Yancheng Economic Development Zone in Jiangsu province.

But Dongfeng’s Wuhan operations are relatively new. 

The company was originally set up in 1964 in Shiyan, a small city near the Wudang Mountain, also in Hubei province, where it produced trucks and military vehicles. Up until a decade ago, half of its yearly production was made up of commercial vehicles. 

The strategic inland location was chosen because of military reasons, a Dongfeng spokesman said. “Twenty -four factories spread across more than 20 valleys near the mountain. Back then it was known as ‘car city stretching miles’,” he said.

“However, the location chosen for political considerations, became a major obstacle for Dongfeng’s further development and moved to Wuhan on the banks of the Yangtze River.

“As the biggest city in Central China, and a city near the Yangtze River, Wuhan has convenient transportations connecting other major cities in China, both by land and water.

“It is also the economic and financial center of Central China, where we can attract more talent and capital.”

Guangzhou Automobile Group Co (GAC), which has joint ventures with Fiat and Honda and is based in the south of China, said its breakthrough year will occur in 2012 because it was still expanding its industrial layout and production capacity.

“We want to gain competitiveness before we expand our scale,” said GAC president Zhang Fangyou. “By 2015, the production capacity is expected to reach 3 million, and the sales revenue will be 400 billion yuan.”

Zhang said the Chinese market is still developing and is subject to government policies, which are hard to predict, but still has confidence in his company’s expansion plans.

“Since 2009, cars are becoming a mass consuming product rather than an elite product. Although some cities might have car restriction policies, the market potential is still huge,” he said.

When Fiat officially joined GAC in 2009, it announced that it would invest 400 million euros ($560 million) in the venture and plans to begin production in Hunan province this year. The facility will initially have the capacity to make 140,000 cars and 220,000 engines per year, and may later increase to maximum of 250,000 cars and 300,000 engines per year.

Meanwhile, back in the Chinese capital, Beijing Automotive Group (BAC), which has joint ventures with Mercedes-Benz and Hyundai, sold 1.5 million vehicles last year — a year-onyear increase of 75 percent. It aims to expand the production capacity to 4 million by the end of 2015.

It is planning to build a new Mercedes-Benz factory in Beijing with a yearly capacity of 300,000 vehicles, but BAC president Wang Dazong said the company will also expand outside the Chinese capital to help reduce costs.

“Beijing is not a paradise for every industry since the cost is high; so we will leave high value-added series, and mid-tohigh level vehicles production in Beijing, and shift other models to other bases,” he said.

“We are building bases across the country with distinct functions: a Shunyi factory in Beijing to manufacture SUVs, Zhuzhou in Central China’s Hunan province focusing on high-end passenger cars, Chongqing to produce economical cars, while Guangzhou targeting the southern China market.”