General Motors edges out Volkswagen in China

Peter Parks | AFP | Getty Images

In the race to be No. 1 in the world's No. 1 auto market, General Motors is edging out its biggest rival, Volkswagen.

On Friday, VW reported first-half sales of 1.54 million vehicles in China. Though that's an 18 percent increase year-over-year, VW did not pass General Motors, which sold 1.57 new vehicles over the same time period.

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GM and VW have long led the Chinese market, mainly because they were among the first of the global automakers to aggressively set-up production in China when it began welcoming foreign investment in the mid 1990s.

As a result, the race to hold first place in the country has become a proxy for the battle the companies are waging to be the global leader in auto sales. Last year, General Motors was tops, selling more than 9 million vehicles, while Volkswagen was third behind Toyota.

Building More, Selling More in China

While GM leads in the U.S. and Volkswagen is dominant in Europe, China is where both automakers are investing heavily to make sure they keep up with its appetite for new cars.

General Motors is spending $11 billion through 2016, opening five final-assembly plants.

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Meanwhile, Volkswagen is investing $12.8 billion to increase its production through 2015.

Their expansions show just how important China has become for both companies and how intent the automakers are to maintain the edge they have over other automakers in China.

Volkswagen's strength is the core VW brand and its mass-market luxury brand, Audi.

Buick continues to lead the way for GM in China, but Chevrolet and Cadillac are both attracting a growing number of buyers.

—By CNBC's Phil LeBeau. Follow him on Twitter @LeBeauCarNews.

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