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For years, Shanghai Automotive Industry Corp., a government-owned behemoth, has worked side by side with General Motors Corp. and Volkswagen AG on world-class assembly lines to build cars for the Chinese market.

Now, the giant auto maker is getting ready to use the technical expertise and experience it has gained from these partnerships -- which turn out hundreds of thousands of Buicks and Chevys as well as VW Santanas and Passats a year -- to make its own high-end sedan.

Shanghai Automotive's shift from an ally of its foreign partners to a potentially dangerous rival is a sign of sweeping changes ahead for auto makers in the fast-growing China market, which has become an increasingly important source of sales and profits for U.S. and European auto companies.

Prodded by Chinese economic planners, large state-run companies that have joint ventures with other foreign manufacturers, from Ford Motor Co. of the U.S. to Japan's Suzuki Motor Corp. and South Korea's Kia Motors Corp., are also moving to develop and sell more vehicles under their own brand names. The push comes amid a broader questioning of the role that foreign companies and brands should play in China's economy.

"This is a watershed in the development of the auto industry in China," says Michael Dunne, president of consultancy Automotive Resources Asia. "The Chinese formed joint ventures for one purpose: to learn how to do it themselves one day. That day is here."

Zhu Xiangjun, a spokeswoman for Shanghai Automotive, says the company's launch of its own brand will foster a "healthy" rivalry that will "drive" the joint ventures to "further improve their competitiveness." The company is expected to release more details about its new-car development plans Monday.

So far, the response from General Motors and Volkswagen has been muted. In a prepared statement, GM said it "understands" Shanghai Automotive's "desire for further growth" and that it is confident "SAIC recognizes that the success of both companies in the China market is closely linked to the success of our joint ventures."

The new car from Shanghai Automotive, China's largest passenger-car maker, will be a modified version of MG Rover Group Ltd.'s Rover 75, a luxury, four-door sedan that will compete head to head with some cars produced by Shanghai Automotive's joint ventures with GM and VW. Shanghai Automotive bought the plans for the cars and the rights to make them from MG Rover Group, before the British company filed for bankruptcy in April 2005.

Shanghai Automotive says its new car, which hasn't been named, will start rolling off the assembly line within the next six months. Sales in the domestic market will start soon after. The company also plans to push into its partners' home turf, with exports to Europe and the U.S. It is aiming to start sales in Europe as early as 2007.

Succeeding with such ambitious plans won't be easy. "It's risky for local companies to start at the high end. Their brands aren't strong enough," says Yale Zhang, an analyst at CSM Worldwide in Shanghai.

In a prepared statement, Volkswagen said, "Volkswagen and SAIC keep a close and long-lasting partnership. We understand SAIC's wish to build up an own Chinese car brand. We offered our support in the past and still do at present."

Over the near term, foreign auto makers have few alternatives. Under Chinese regulations, to make cars in China, foreign companies must form joint ventures in which their Chinese partners own no less than 50%. The major multinationals have already teamed up with the biggest and most promising local firms. So, observers say, they have little choice but to keep making their cars and encourage their partners not to compete too directly with them.

For now, few analysts expect Shanghai Automotive or China's other state enterprises to suddenly walk away from their very substantial, and profitable, investments in joint ventures with foreign firms. But, they say, balancing cooperation and competition is likely to become increasingly difficult.

GM's China joint ventures have become especially critical to the company at a time when it is piling up large losses in North America. For 2005, GM reported preliminary profit of $327 million from its affiliates in China, compared with $417 million the year before.

Already, sales of homegrown Chinese cars, many made by small manufacturers, are starting to take off. Last year, 26% of passenger cars sold in China were Chinese brands, more than double the share in 2001, according to Automotive Resources Asia. Heightened competition is pushing down prices and squeezing profits.

Now that Shanghai Automotive and the country's other major vehicle manufacturers are getting into the game, it is likely to accelerate the trend. Shanghai Automotive employs about 50,000 people. Last year, its manufacturing ventures made more than 600,000 vehicles, dwarfing the output of Chery Automobile Co. and Geely Holding Group, two smaller car makers that have garnered attention abroad because of their export ambitions.

Shanghai Automotive traces its roots back to factories that made tractors, buses and shiny, black Phoenix sedans for party cadres in the years after the communist revolution. The company stopped making its own vehicles in the mid-1980s when it signed a joint-venture deal with Volkswagen. Partnership agreements followed with dozens of parts makers and, in 1997, with GM.

Shanghai Automotive's recent efforts say a lot about industrywide strategies for gaining access to know-how and technology to strengthen China's domestic manufacturers. The company says it has gleaned "rich experience and resources in every field" from its work with GM and VW.

In addition to manufacturing ventures, Shanghai Automotive insisted on a joint R&D operation with GM. Staffed by top GM engineers and designers and their local counterparts, the center has been doing increasingly sophisticated design work for GM cars sold in China.

Shanghai Automotive is hiring experienced engineers and managers from these joint ventures to work on its own car projects. It is also bringing in veteran executives from foreign car makers. Wang Xiaoqiu, general manager of the Shanghai Automotive unit that will be making the new sedan, for example, once worked for Shanghai Volkswagen. Its R&D head, Wang Dazong, is a veteran of GM and parts supplier Delphi Corp.

Shanghai Automotive says it is planning to open a design center in Europe later this year. And it has brought in engineers from Korean sport-utility-vehicle maker Ssangyong Motor Co., in which Shanghai Automotive bought a controlling stake in 2004.

Chinese and foreign auto makers are already grappling with the implications of the state enterprises' solo efforts. Xu Liuping, chief executive of government-controlled Changan Automobile Group, which has joint ventures with Ford and Suzuki, says his company plans to roll out four of its own new passenger-car models within the next year.

"Of course, there will be a certain degree of competition," says Mr. Xu. "But my view is that different brands and products will have different target customers."