Most of the time, the shift in the business world's axis away from the US and towards Asia proceeds gradually enough to be imperceptible. This week there was a lurch.

It was noticeable in New York, where Citigroup and Merrill Lynch raised billions in capital from funds in Japan, South Korea to shore up their balance sheets. It was equally obvious where I was - in Detroit, where the troubled US car companies have gathered for their annual home-town motor show.

One sign of it was that the most discussed car at the Detroit show was not actually on display. It was Tata's $2,500 Nano small car for the Indian market, which captured the attention of US executives who have their own plans to push into India and to expand further in China.

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A second sign could be found off the main show floor of the Cobo conference centre, in a second hall where various Chinese manufacturers showed off vehicles. Here were cars made by Geely, BYD (Build Your Dreams) Auto and Changfeng Group, which started life in a People's Liberation Army factory.

Both drew attention from the showier launches of the US companies - new versions of the big pick-up trucks that account for one-eighth of US sales. These were Ford's F-Series truck and the Dodge Ram, the latter unveiled by the uneasy triumvirate now running Chrysler: Bob Nardelli, Jim Press and Tom LaSorda.

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It was not well-timed. The US auto market is feeling the effects of the housing bust and now a pull-back in consumer spending. Pick-up sales - including those of the new Toyota Tundra - have suffered because many are bought by plumbers, electricians and the like, whose businesses depend on housebuilding.

That makes restructurings at Ford and General Motors tougher and leaves Chrysler, in the hands of the private equity group Cerberus, struggling to switch towards smaller, more fuel-efficient cars. Perhaps that accounted for the palpable tensions among Nardelli, Press and LaSorda, who kept professing to be having fun.

There was talk in Detroit this week about how producing their own equivalents of the Nano - small, very cheap cars for Americans - could give Chinese companies an opening to the US market.

In the long term, there is something to this. The only Nano-like vehicle in Detroit was Daimler's Smart car, which is being launched in the US this week. But the Smart ForTwo - with its low emissions and multiple airbags - will cost US consumers at least $11,500, which would buy you almost five Nanos.

Meanwhile, American brands have been forced upmarket by the intrusion of high-quality Asian companies such as Toyota. The new Chevrolet Malibu, which is GM's answer to Toyota and Nissan, is a very well-appointed car that costs $20,000 or more. There must be room at the bottom of the car-buying pyramid.

But I would not bet on the Chinese filling the gap soon. The Chinese cars I saw at Detroit looked like US ones but the quality of engineering and finish was lower. The door on one BYD car I sat in did not even close properly, never mind achieve the satisfying clunk of an Audi.

There are deeper problems, too. Chrysler would like Chery, another Chinese carmaker, to be able to meet US safety and environmental standards soon, because it hopes to import Chery-made cars to make up for its lack of small cars. But Chrysler does not expect Chery to do so until at least 2010 and perhaps 2012.

For now, Chinese cars will have a bigger impact in their home market, just as the Nano changes the Indian market. Both of those things matter more to US and European carmakers than they would have done a few years ago because of the changing balance of vehicle sales in developed and developing markets.

Sales in the US will probably drop below 16m this year and may not regain their 17m peak for a long time, if ever. Not only will the downturn squeeze the market but Ford and GM are also pulling back from their reliance on pumping up volume with discounts whenever car buyers flag.

Meanwhile, China's car market is growing rapidly: some 8.5m vehicles were sold there last year and it is expected to overtake the US as the world's biggest auto market by 2015. The growth of China, as well as markets such as India, Brazil and Russia, is forcing US companies to focus outside their borders.

That is why Tata was admired in Detroit for its boldness with the Nano. "The audacity of a company bringing out a one lakh [100,000 rupees] car is so exciting," said John Sullivan, Ford's head of product development in Asia. "There is an analogy with Henry Ford making his car for the masses 100 years ago."

It also showed that US, European and Japanese companies have a fight on their hands in India and China. Although GM sold 1m vehicles in China last year, domestic companies have grabbed 30 per cent of the market. India is even better suited to the home team because vehicles priced at $7,000 or less make up 70 per cent of sales there.

Making money in these markets is not going to be easy. Companies such as Tata and Chery can make vehicles for domestic consumption that are very cheap partly because they do not meet US safety and environmental standards. US companies that tried to compete directly would lose money and damage their brands.

But they have to compete somehow. Until now, US companies could always rely on their dominance of the biggest market in the world. That dominance has been threatened for a long time; now even the market itself is being challenged. Chrysler, Ford and GM are at home in Detroit but the action is elsewhere.

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