China's passenger vehicle sales in 2010 will top 11.6 million units, a surge of 35 percent from 2009, Roland Berger said in a report released in late December.

Albeit at a lower rate, China's passenger vehicle market will continue to grow over the next five years on sustained rapid economic growth and rising household disposable income, the company says.

At the same time, Roland Berger warns in the report that the Chinese economy will face major challenges including currency appreciation, unsustainable stimulus plans, tighter monetary policy, unemployment, and rising labor costs.

With growth in the passenger vehicle market slowing and international automakers shifting more production capacity to China, western auto parts suppliers should improve production planning, upgrade their research and development capacities in China and increase localized parts supply, the consultant says in the report.