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Chery Automobile Corp moved up three notches in China's car sales ranking last month - the first time a domestic automaker has unseated a foreign joint venture to break into the top three.

Chery sold 21,000 vehicles in February, a 130-percent jump from the same period a year ago, following Shanghai Volkswagen with 23,600 units and Shanghai General Motors Corp with 22,800.

In January, the top three sales leaders were Shanghai GM, Shanghai VW and First Automobile Works' joint venture with VW.

Chery's sales boom - prompted by its highly popular QQ and three new models that hit the streets in January - moved the company up from No. 6 in January, when it sold 17,000 vehicles.

"The central government's efforts to encourage the sale of small cars to help energy conservation was important for Chery," said Sun Muzi, an auto analyst at Sinotrust Marketing Research and Consulting Ltd.

"This private company is good at offering inexpensive self-designed cars at a very attractive price to China's cost-sensitive consumers," he said.

In January, China's central authorities ordered local governments to lift roadway restrictions on small cars by the end of March in an effort to ease tight energy supplies, protect the environment and nurture China's independent auto brands. In the past, cars with small engines were banned from some highways.

The new policy primarily benefited domestic manufacturers of economy cars, including Geely Group and Changan Automobile Co.

"But Chery also needs to improve in developing models to extend its presence into the middle and high-end markets, not only to be a successful car producer but also for profitability," Sun told Shanghai Daily.

Chery's most popular small car, the QQ, priced around 40,000 yuan (US$4,950), generates only a 500 yuan profit, while cars in the mid and upper ranges can be marked up 20,000 yuan or more.

Last year, the company's profit fell to 95 million yuan from 188 million yuan in 2004 despite a 118 percent sales surge to 185,000 units.

In comparison, sales in China's auto market grew 26 percent overall last year.