"There's money here and people spend that money on cars"
J D Power and Associates
According to the China Association of Automobile Manufacturers, passenger car sales rose to 3.8 million last year.
China, with 1.3 billion people, is fast evolving from a "bicycle kingdom" into a leading automobile market where foreign producers are racing to open factories and target a growing urban middle class.
General Motors said its total sales last year rose by 32 per cent to 876,747 vehicles while Ford reported an increase of 87 per cent to 166,722 units.
European luxury car manufacturer BMW reported a similar trend, recording a 60 per cent surge in sales for last year.
"There's money here and people spend that money on cars," Michael Dunne, vice-president for Asia-Pacific for automobile research firm J D Power and Associates, said.
"The Chinese government has made no secret of its intention to develop a car culture and a car industry. All of the forces are working together."
Shanghai General Motors was the country's biggest-selling carmaker last year with 365,400 vehicles sold while Chery Automobile Co sold 272,400 units to become the biggest car manufacturer, the Chinese industry group said.
Fledgling Chinese manufacturers have begun exporting their own cars, trucks and four-wheel-drive vehicle.
Analysts say Chinese automobile makers are eager to break into the US market but could face trouble meeting safety and environmental standards.
The car craze which shows no sign of slowing down is taking a toll in the form of smog and congestion in China's urban areas, many of them among the world's 10 dirtiest cities.