China's fast-growing auto market has long been divvied up between home-grown car makers and foreign car makers, which have both been able to thrive by serving different customers. Now, though, they may be headed for a collision as the two groups start to invade each other's territory.

Since Chinese car sales began taking off in earnest a decade ago, foreign and Chinese makers have traditionally gone after different swaths of consumers: Global car makers have targeted the richer elites, while domestic makers including Chery Automobile Co., Zhejiang Geely Holding Group Co. and BYD Co. have catered to more frugal consumers.

But in a trend that's been building for a year or two, the two groups of companies are increasingly going after the same demographic: people who are just getting affluent enough to afford a car.

It's a burgeoning market. The number of households with annualincome of more than 60,000 yuan ($8,790), a level deemed sufficient for a family to buy a no-frills car, is estimated to nearly double over the next four years to 65.6 million, according to U.S. consulting firm Alix Partners.

For foreign car makers, this growth is too spectacular to ignore, so just as Chinese-made cars improve in quality, foreign makers are trying to design cheaper models. As a result, the two separate worlds of Chinese domestic brands and their global counterparts are 'increasingly converging into a single, more competitive market,' said Tim Lee, head of General Motor Co.'s global operations.

Now, GM, for one, is taking direct aim at the no-frills market with its redesigned Chevrolet Sail, one of the first subcompacts by a global car maker to break the 60,000-yuan price barrier.

To create a rival to cars such as Geeley's King Kong, a 56,000-yuan subcompact sedan, GM went back to the drawing board in 2005. Instead of redesigning the previous Sail model, it built a new car from the ground up, liberally drawing from GM's global parts bin, said Joseph Liu, a vice president of Shanghai GM, the joint venture of GM and Shanghai Automotive Industry Corp. that makes the Sail. As a result, roughly 45% of the new Sail shares components with GM cars sold around the world, which allowed Shanghai GM to cut costs.

GM engineers also tried to 'design smart' to save money, Mr. Liu said. Instead of the usual two-bulb headlights, the redesigned Sail uses one-bulb lamps with a clever reflector design that allows one bulb to handle both high and low beams.

With such simplified designs, GM set a target to cut the car's materials and component costs by 25% from the previous model. Mr. Liu wouldn't say whether the company achieved that target, but it saved enough to slash the starting price to 57,000 yuan from 66,000 yuan, placing the car in direct competition with the 56,000-yuan Geely subcompact.

Efforts like the new Sail are critical to GM's long-term survival in China, Mr. Lee said. 'We're responding to the rise of the purchasing power of the middle class,' he said.

In addition to GM's Sail, Nissan Motor Co. is set to launch later this year a subcompact car called the March, with prices starting around 70,000 yuan. And Toyota Motor Corp. has said it is considering a car smaller and more affordable than the Yaris, currently the cheapest in its lineup at a 92,000-yuan starting price.

Geely, for its part, plans to replace the King Kong with a significantly redesigned model called the Englon SC6 next year. With the SC6 and an array of other models Geely plans to launch over the next two years, the Hangzhou auto maker hopes to compete with global brands, said Frank Zhao, Geely's product and technology chief. Geely's vehicle quality and reliability are generally unproven and the company could still stumble in winning consumers' hearts, but Mr. Zhao is hopeful.

'We tried to do a good job [with the new cars] on every detailed level, and when they hit showrooms over the next two years, we think people are going to say, wow, is this a Geely?' he said.

To boost fuel economy and lure buyers, Geely plans to equip the new cars with turbo-enhanced one-liter and other small-displacement gasoline engines and price them competitively. The Englon SC6, for instance, should start around the same price, 56,000 yuan, as the current King Kong model it is replacing.

The rapidly improving quality of homegrown cars means that Chinese buyers like Xu Le, a 26-year-old sales specialist for a cosmetics company in Beijing, have more choices.

Ms. Xu has never owned a car, but her rising income allowed her to eye the Honda Motor Co. Fit subcompact -- that is, until she saw an ad for the Roewe 350. Shanghai Auto, which developed the Roewe line with technology it acquired from MG Rover, is launching the 350 this spring starting at around 90,000 yuan -- making it a bigger car for roughly the same amount of money as the Fit.

She says she likes the Honda, 'but the Roewe is stylish and looks like a car I want to drive.'

Norihiko Shirouzu