But the strong demand mainly benefited foreign automakers while the homegrown brands are still facing challenges in the domestic market.

Statistics from CAAM showed that in May, Chinese brands' combined market share in the passenger vehicle segment continued its downtrend, with a 2.92 percentage point drop from last year, though their sales of 580,600 units still accounted for 36.51 percent of the segment.

Their market share in the first five months dropped 3.83 percentage points over the previous year.

US automaker General Motors and its joint ventures sold a record 276,109 vehicles in China in May, with year-on-year growth of 9.2 percent. Shanghai GM and SAIC-GM-Wuling, as well as their Buick, Chevrolet, Cadillac and Wuling brands, also reached new highs for May sales. In addition, Shanghai GM's total sales surpassed 9 million units for the first time since the joint venture was launched in 1997.

Fellow US brand Ford Motor Co's sales in China surged 32 percent year-on-year to 93,323 units in May.

Analysts said more discerning Chinese consumers helped foreign automakers. The booming luxury vehicle segment was an example, as Chinese automakers can hardly compete in the sector.

"The foreign luxury brands seem to appeal to young Chinese buyers as they perceive them as safer, more technologically advanced and of better quality," said Wilson Liu, China Automotive leader of PricewaterhouseCoopers.

"On the other hand, a trend of overall vehicle downsizing amid more stringent emissions standards is also reflected in the luxury segment. To meet these regulations, entry-level models are increasingly available and appeal to younger, first-time buyers," Liu said.

The consulting firm found that in the past decade, the China market expanded nearly fivefold, from 4.3 million vehicles to 19.9 million. Luxury vehicles have seen particularly impressive growth.

PwC estimated that luxury vehicles will have a compound annual growth rate of 11.5 percent from 2013 to 2020, which is almost double that of non-premium light vehicles.

The Chinese market is predicted to surpass the average luxury penetration rate of 10 percent in mature markets like the US to reach more than 3 million units by 2020.

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