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Vehicular ad-hoc networks (VANETs) play a critical role in enabling highway active safety applications such as collision warning and vehicle tracking. The most pressing challenge in enabling such applications is to maximize the amount of disseminated vehicle state information while avoiding network congestion. In this paper, we explore the structure of VANET tracking problem and propose an adaptive rate control algorithm based on network condition and tracking error. Proposed algorithm uses a closed-loop control concept and accounts for the lossy channel. This algorithm is shown to achieve better tracking performance than existing solutions. We first analyze the algorithm behavior in small scale Matlab simulations with bounded dynamical systems and then evaluate its performance using OPNET simulations with realistic vehicle trajectories from a microscopic traffic simulator (SHIFT).