Retail deliveries of cars, multipurpose and sport utility vehicles climbed 14 percent to 1.47 million units in June, the Passenger Car Association said on its website in early July. For the first six months, sales rose 11 percent to 9.09 million.
Foreign automakers are targeting China's smaller cities as the country's major population centres increasingly restrict the number of passenger vehicles to curb pollution and congestion. That's led to the introduction of cheaper models to compete with local carmakers, which have struggled to stem a loss in market share in the world's largest auto market.
"Automakers are focusing their product launches on the lower- and mid-end of the market," said Harry Chen, a Shenzhen-based analyst at Guotai Junan Securities Co. Ltd. "When new products come into the market, it stimulates sales."
General Motors Co. (GM) introduced the Aveo subcompact sedan last month, while Volkswagen AG started sales of the new Polo compact sedan at the end of May, according to the companies.
At a starting price of 73,900 yuan ($12,000), the Aveo is cheaper than BYD Co. (1211)'s G6 sedan and compares with the 68,800 yuan price tag for Geely Automobile Holdings Ltd. (175)'s EC7 sedan, according to pricing data from GM and car-shopping website autohome.com.
The competition is eating into the market share for Chinese brands. China's local marques accounted for 21.5 percent of industry car sales in May, a decline of 5.1 percentage points from a year earlier, according to data from the state-backed China Association of Automobile Manufacturers.
Great Wall Motor Co. (2333), China's largest SUV maker, replaced three of its executives amid a sales slump. The reshuffle comes after the company posted sales declines in five of the past six months and the second delay of its key Haval H8 sport utility vehicle.
SAIC Motor Corp. (600104), China's largest automaker, pledged to increase spending to build up its own car brands after sales barely rose in the first five months of this year. Chairman Chen Hong told shareholders on June 19 that the automaker faces a shortage of talent and lacks innovation.
Guangzhou Automobile Group Co. (2238) is targeting exports to the U.S. to boost its prospects back home. The manufacturing partner of Toyota Motor Corp. (7203) is targeting to start sales of its Trumpchi brand, featured in the movie "Transformers: Age of Extinction," in the U.S. next year.
Premium brands are stepping up the pace of their expansion in China as demand for luxury autos continues to outpace the overall market. Bayerische Motoren Werke AG, the world's biggest premium carmaker, last month extended its partnership with Brilliance China Automotive Holdings Ltd. (1114) for another 10 years to manufacture vehicles in China.
The Munich-based company's China sales have increased 25 percent during the first five months of this year, on pace to top annual deliveries of 400,000 units for the first time.