The China Association of Automobile Manufacturers (CAAM) announced annual sales rose 46.15 percent year on year to 13.64 million units . Output increased 48.3 percent to 13.79 million units.

Passenger car sales were up 52.93 percent to 10.33 million units, and production was 10.38 million units, up 54.11 percent year on year.

The brisk sales in China is in contrast with the United States where 10.43 million units were sold last year, 2.8 million units less than in 2008, as the global financial crisis kept U.S. consumers out of the showroom.

The three top-selling brands last year were Shanghai Volkswagen, FAW Volkswagen and Shanghai General Motors -- all joint venture brands between Chinese auto makers and the German or U.S. counterparts.

"China's market still enjoyed abundant potential, as living standards improved and the average auto ownership remained low," Dong Yang, CAAM deputy chairman told Xinhua.

The industry would continue to see rapid growth in the next decade as it had become a pillar of the national economy, he said.

To boost the sluggish auto market in 2008 and spur the use of clean and fuel-efficient cars, the government announced in January last year that it would halve the purchase tax to 5 percent on vehicles with a displacement of less than 1.6 liters.

Rural consumers got up to 5,000 yuan (735 U.S. dollars) in government subsidies for vehicles with a displacement under 1.3 liters.

The annual revenue from auto purchase tax was expected to surpass 110 billion yuan, a rise of 10 billion yuan year on year, as more units were sold, analyst said.

Besides policy incentives, the underlying reason behind the sales boom was that the consumption structure was improved while housing and traveling costs increased, said Yao Jingyuan, chief economist with the National Bureau of Statistics.

"It would profoundly impact the Chinese auto market," he said.

Brisk sales in China also allowed the world's leading auto makers report double-digit growth in China last year despite bleak pictures in other parts of the world.

Against the backdrop of 15-percent slump worldwide, Ford reported a 44-percent sales rise to 440,619 units in China in 2009.

General Motors (GM)'s sales rose 66.9 percent to a record high of 1.82 million units in China. The German auto maker Volkswagen AG sold 1.4 million units in China, up 36.7 percent from a year earlier.

Since the sales in 2009 would overdraw demands for this year and next, and with the less aggressive tax incentives for 2010, sales expansion was expected to slow remarkably this year, said Huang Yonghe, analyst with the China Automotive Technology and Research Center.

Dong Yang estimated the auto sales growth would retreat to 10 percent to reach 15 million units in 2010.

"Despite China's top position in sales, there are still distance to go before it becomes a real auto giant, as it does not own the state-of-the-art technologies nor world-famous brands," said Dong Yang.

As part of its "going global" strategy, Geely, China's largest privately-owned car maker, is close to finalizing a deal to buy Volvo to acquire the new energy technology and access the world auto market.

The Beijing Automotive Industry Holding purchased some assets of GM's Saab in December. The Sichuan Tengzhong Heavy Industrial also has agreed to take over Hummer brand.

Acquiring foreign brands could help accelerate China's pace of technological innovation, but it could not be a shortcut to the global stage, said Han Lei, deputy director of the Society of Automotive Engineering of China.

"We can not simply copy foreign brand's technology and management expertise, but use them as a basis to develop our own model," he said.

The unprecedented boom also boosted producer's morale for further expansion.

"The Chinese auto makers added the capacity by 30 percent to 20million units in 2009, leaving their bitter memories of job cuts and shuttered business far behind," said Wei Wenqing, vice managerof the Dongfeng Citroen Motor Corporation.

Fuel-efficient cars have already shown some signs of overheating, as the demand for auto with displacement less than 1.6 liters was about 3 million units before 2011, less than half of the capacity of 7 million units, said Jia Xinguang, auto industry analyst.

"Since this market is largely affected by government policies, uncertainty and risks remain," he said.