FRANKFURT, Dec 31 - German carmakers will gain market share by producing more smaller vehicles, even as competition in the global auto industry intensifies, the head of Germany's VDA automotive industry association said in an interview.

If BAIC buys GM's unit Saab, and another Chinese company buys Ford's Volvo, then that is a sign that the balance is shifting in the global auto market, VDA president Matthias Wissmann said in an interview with French daily Les Echos published on Thursday.

Nobody can rest on what has been achieved so far.

As China overtook the United States as the world's biggest auto market, Beijing Automotive Industrial Holding Corp (BAIC) agreed to pay $200 million for the technology of GM's [GM.UL] Swedish Saab subsidiary, and U.S. rival Ford (F.N) is nearing an agreement to sell Volvo to China's Geely. [ID:nTOE5BM00Z] [ID:nTOE5BU021]

Wissmann said he expected German carmakers, which account for 80 percent of the global premium car market, to hold and further expand their position globally.

At the same time we are attacking in the small car segment, with cars that only use about 3 litres of fuel for 100 kilometres, he told the newspaper.

In 2010, he sees the German auto market normalising, with 2.75-3.0 million new registrations, which is only slightly below the multi-year domestic average.

But more decisive will be the question of how international markets develop -- three out of four cars built in Germany are for export, he said.

We expect a slight recovery of global markets and thereby an increase in export and production, albeit at a low level. The fact that German carmakers were able to win market share in important countries this year makes be cautiously optimistic.

(Reporting by Maria Sheahan; editing by John Stonestreet)

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