Australia's love affair with large cars suffered in 2005, as the country's Big Four auto makers bore the brunt of escalating fuel prices.

It became obvious early in the year that small cars would dominate as fuel prices climbed to record levels. Vehicles such as the Toyota Corolla and Holden Barina saw sales soar, with the Corolla becoming the best-selling small car by year's end.

At the same time, Holden Ltd.'s best-selling Commodore and Ford Motor Co. of Australia Ltd.'s Falcon large sedans saw volumes fall to their lowest levels in the past 12 to 14 years.

Struggling Mitsubishi Motors Australia Ltd.'s new 380 sedan also failed to garner needed sales. The all-new car, which replaced the Magna in the auto maker's Australian lineup, launched in October with a monthly sales target of 3,000 units. But demand failed to materialize.

The auto industry had hoped to reach its long-sought sales goal of 1 million vehicles in the year, but October saw deliveries fall 6.8% below year-ago levels. The year ended about 12,000 units shy of target.

Elsewhere, a strategic alliance between Malaysia's Proton Holdings Bhd. and Volkswagen AG was taking shape. VW initially wanted a 51% controlling share in the national car maker but reportedly backed off in December, saying it would accept a 49% stake if it could have managerial control. However, Proton officials nixed the idea and negotiations came to a halt.

Proton underwent a convulsive year, beginning in July when CEO Tengku Mahaleel Ariff was ousted following clashes with the company's board of directors. Ariff had publicly criticized the Malaysian government for lowering tariffs that protected domestic auto makers from foreign competition.

The Proton board in December named Zainal Abidin Tahir, former deputy managing director of competitor Perusahaan Otomoil Kedua Sdn Bhd, as CEO, effective Jan. 1, 2006.

South Korea's GM Daewoo Automobile & Technology Co. prospered in the year as parent General Motors Corp. chose a number of its small vehicles to be sold in Europe and the U.S. under the Chevrolet brand. Four GM Daewoo models were set for launch in Europe in 2006.

One of them, the Captiva, was the company's first small SUV and was engineered by GM's Holden subsidiary in Australia. The vehicle, which was to be unveiled at the 2006 Geneva auto show, offered 5- and 7-passenger configurations, and front- or all-wheel drive. It was powered by a 2.4L 4-cyl., a 3.2L V-6 or a 2.0L diesel engine, developed jointly with GM Powertain and Italy's VW Motori SpA.

GMDAT also completed the purchase of the former Daewoo Motors Co. Ltd. Bupyeong manufacturing complex, in late October. Included were two vehicle assembly plants and one engine and transmission facility. The operation had been operated under the auspices of Daewoo Incheon Motor Co. since the formation of GM Daewoo in September 2002.

Shortly before the sale was finalized, GMDAT announced plans to shift some testing laboratories from Bupyeong to a new test-track complex scheduled to be operational by mid-2007.

The 100 billion won ($95 million) test track was to be located in Incheon and was said to shorten development lead-time, as GM Daewoo vehicle testing at the time was being conducted at a variety of test facilities.

India's auto industry was thinking small in 2005. Domestic auto makers turned their attention to producing or importing inexpensive vehicles to serve the country's growing hunger for fuel-efficient passenger cars.

Ford announced in October it would launch the new Fiesta in India, joining the Ikon, Mondeo and Fusion sedans and the Endeavor SUV.

The Fiesta was to slot in between the Ikon and Fusion.

A month earlier, Tata Motors Ltd. and Fiat Auto SpA of Italy agreed to form an alliance. Tata's relationship with MG Rover Group, with whom it built the under-performing City Rover, ended in 2005 when the British car maker collapsed. The Indian car and truck maker was looking for a new entree into the European market.

Although no specifics had been decided by year-end, the relationship between Fiat and Tata was said to be mutually beneficial to both small-car makers, especially Fiat India Ltd., who's aging models suffered a precipitous sales slide.

Japan's domestic auto makers, while gearing up new models for India, also had their sites set on China expansion plans. Although growing quickly in other global markets, Japan's largest auto maker, Toyota Motor Corp., had been cited by industry watchers for being noticeably absent in China. But that changed in 2005.

Toyota announced it would assemble its Prius hybrid-electric vehicle in China in 2006. It also said it would open a fourth plant there to assemble 100,000 Camry midsize sedans annually.

Later, the auto maker announced plans for a fifth Chinese plant, to open in mid-2007, bringing its total installed capacity in the country to about 440,000 units annually, with a total investment of nearly $800 million.

Toyota in 2005 saw total global vehicle production reach 8.2 million units, a 9.1% increase over 2004. The company vowed to build more than 9 million vehicles in 2006, nipping at the heels of GM for the title of No.1 global auto maker.

Meanwhile, competitors Nissan Motor Co. Ltd. and Honda Motor Co. Ltd. announced their own expansion plans for China. Nissan planned the launch of its Infiniti luxury marque in late 2007 or early 2008. It also began exporting U.S.-made Quest minivans to the country in July, with a sales goal of 4,000 units in fiscal-year 2005.

In addition, Nissan launched the Tiida compact sedan, built at its joint venture with Dongfeng Motor Co. Ltd. in Huadu, Guangzhou province. The small car was the first of five models the auto maker planned to introduce in China to grow its annual sales to 500,000 by 2007-2008. They included the Tiida hatchback, Fuga luxury sedan, the aforementioned Quest and 350Z sports car.

The auto maker said China would contribute to further momentum on the global automotive scene, eventually becoming the third-largest market for Nissan worldwide

Japan's No.2 auto maker, Honda, announced it would begin selling its Acura near-luxury brand in China in early 2006, ahead of a planned Japanese-market launch for the brand in 2008.

The company also said it would build its first transmission and parts plant in the country, in Guangdong province, with output of 240,000 units annually. Honda planned to invest $90 million in the plant, set to open in spring 2007, which would supply the auto maker's three Chinese joint ventures.

Honda also vowed to double vehicle-production capacity in India to 100,000 units annually by the end of the decade.

Mazda Motor Corp. progressed with its Chinese expansion plans, opening an engineering support center near Shanghai in August, to provide expertise for its operations in Nanjing, Changchun and Hainan.

Mazda hoped to sell 300,000 units in China by 2010 and planned to launch eight new models over a 3-year time period. In July, it added the RX-8 sports car to its Chinese offerings.

Key to Mazda's increasing presence in China was its joint venture with Ford Motor Co. and the Changan Automotive Group in Nanjing, which received Chinese government approval early in the year and was set to begin production in 2006. The company planned to build 160,000 units annually initially, with annual output of 200,000 a future possibility.

Mazda and Ford also got the nod for an engine plant to be located near the Nanjing vehicle assembly plant, with plans to produce 350,000 units annually.