BEIJING-- Foreign auto manufacturers think it would be crazy to stop producing cars in China just because the country's entry into the World Trade Organization is making imports cheaper.

Even after the tariff on foreign-made cars settles at just 25 percent in mid-2006 from as high as 50.7 percent now, mass sales in China will still require manufacturing inside the country, they said.

"If you don't have a local production, you can't sell more than 20,000 cars a year in China," said Peter Hirschfeld, a marketing manager at Audi AG.

Audi, which follows what Hirschfeld calls a "Yin and Yang" concept of selling both locally produced units and imports, this year expects to sell 31,000 Audi A6's from its plant in northeastern Changchun City.

China recently said passenger car sales rose 23 percent to 191,300 units in the first quarter from the same period a year ago, making it the world's fastest growing major market for automobiles.

Against such statistics -- and expectations that China could become the world's third-largest market in less than a decade -- the vast majority of automakers believe they must hedge their bets.

"The right strategy on this WTO situation right now is to be flexible," said Thomas Hausch, executive director of international sales at Daimlerchrysler which just extended an agreement to produce jeeps in Beijing for another 30 years.

"There will very likely be some things we don't like, non-tariff barriers, that will still make it necessary to produce in-country," he said.

Most companies expect Beijing to fight hard to keep imports out, notwithstanding its WTO commitments to lower tariff and scrap licenses, AFP reported.

A major reason is that china's own sprawling and highly inefficient auto industry is expected to be one of the big losers of WTO membership, making large numbers of workers redundant.

In a harbinger of problems to come, workers from Beijing automobile works earlier this year demonstrated in the capital over medical and other benefits.

Policy makers hope foreign companies can help mitigate the threat to social stability by setting up plants in China and will use all means at their disposal to make it happen, executive's fear.

"China is a very, very bureaucratic country," said a foreign auto executive who asked not to be named. "It's very, very creative in finding bureaucratic barriers." Another argument for making cars in China is that tariffs will fall only little by little, while import quotas will not disappear until 2005 -- too gradual for companies eager to make money in China.

Some automakers also say that being in China helps them keep a finger on the pulse of the market and understand changes in local demands.

It signals commitment to China and helps persuade local customers that car companies are not just "foreign invaders", in the words of one executive.

"You need to be where you sell," said Mitsubishi's Torok. "You need to have the feel for the market and the commitment to the market, which building in the market indicates." In the years ahead, China may also become an increasingly economical place to make and design cars, not least because of its well-educated work force.