MEXICO CITY — When Luz Diaz went shopping for a new set of wheels, the 42-year-old single mom broke with family tradition. Many of her relatives own American cars. Diaz bought Japanese.

"It has a lot of safety features, and it's fuel-efficient," said Diaz, who recently purchased a subcompact Honda Fit for about $13,000. "The Japanese companies are more environmentally conscious than the American companies. That's important to me."

Buyers such as Diaz are fueling record sales of Japanese vehicles in Mexico, long a stronghold of Detroit's Big Three automakers. In 2006, Japanese companies, including Honda Motor Co., Toyota Motor Corp. and Nissan Motor Co., together grabbed a record 32 percent of the Mexican market. That's up 9 percentage points since 2000, according to the Mexican Automotive Industry Association.

General Motors Corp., Ford Motor Co. and DaimlerChrysler saw their combined market share fall 7 percentage points to 48 percent over the same period. Volkswagen is also sputtering. The German carmaker ended 2006 with slightly less than 12 percent of the Mexican market, a loss of nearly 8 percentage points since 2000.

Japanese manufacturers have been helped by a trade agreement with Mexico implemented in 2005 that allows more of their cars to enter the country duty-free. But price isn't the only factor driving sales. Quality and service are winning customers in Mexico, just as they have in the United States.

SATISFIED CUSTOMERS

Honda and Toyota dominated the most recent J.D. Power & Associates satisfaction survey in Mexico. The only U.S. nameplate to claim a top spot was the subcompact Dodge Atos, which is actually manufactured by South Korean automaker Hyundai Motor Co.

The Big Three's slippage south of the border comes after they lost nearly 40 percent of the U.S. market to Japanese competitors. They're loath to lose ground in Mexico, the region's most promising vehicle market.

More than 1.1 million new cars and trucks were sold in Mexico last year, making it the 14th-largest market in the world. That's well behind the 16.7 million purchased in the U.S., but some analysts calculate that Mexico is on track to surpass Canada, the No. 11 vehicle market, by the end of the decade.

Thanks to a stable economy and more abundant consumer credit, Mexico's annual new-car sales have surged 35 percent since 2000 while growth in the rest of North America has stalled.

There's plenty of pent-up demand. Only 2 in 10 Mexicans own a car. Millions more will be looking for wheels if the economy keeps growing. Carmakers looking to gain share in North America will need to get Mexicans into their vehicles.

U.S. automakers "definitely have reason for concern," said Kimberly Kennedy, director of Latin American operations at J.D. Power. "They are continuing to lose share ... in a significant growth market."

FORD NOT GIVING UP

Some erosion was inevitable as Mexico opened itself to more competition. Last year, DaimlerChrysler sold more than 128,000 vehicles in Mexico, its best year since 2001. However, General Motors' unit sales slipped 1.9 percent while Ford's volume was off 6.9 percent.

Ford spokeswoman Sara Tatchio said the decline was the result of some reshuffling and said the automaker was bullish on its sales prospects in Mexico, where it introduced 11 new models late last year.

"We have a long history with Mexico. We are committed to our business there," Tatchio said. "We are going to continue to offer a variety of products that, hopefully, get better and better and attract more and more customers."

Nissan also is battling to maintain its Mexican market share. The Japanese automaker has been selling vehicles here since the 1960s and operates two assembly plants in Mexico. Its no-frills Tsuru is the nation's best-selling car.

Still, the company's unit sales slipped 2.8 percent last year as a flood of used vehicles from the United States cut into subcompact sales.