Vehicle sales in China are expected to grow 3 percent to 27.66 million units this year following a hard-won 2.1 percent growth in 2022, said the country's leading industry association on Thursday.

Automakers delivered 26.86 million vehicles in 2022, despite monthslong production disruptions across the country caused by semiconductor shortages and the lingering COVID-19, said the China Association of Automobile Manufacturers.

The growth reflected strong market demand as well as favorable and timely policies rolled out by the government, said Chen Shihua, deputy secretary-general of the CAAM.

The halved purchase tax, which was in place from June to December, was estimated to have increased passenger vehicle sales last year by at least 1.45 million units, according to the China Passenger Car Association.

NEVs saw "explosive" growth last year, said Chen. A total of 6.89 million electric cars and plug-in hybrids were sold in 2022, up 93 percent year-on-year. They accounted for a quarter of total vehicle sales for the year.

The surging popularity of NEVs saw China's BYD overtake FAW-Volkswagen as the best-selling carmaker in China in 2022, with 1.86 million vehicles sold during the period, up 149 percent year-on-year.

Chen said as both the macro-economy and consumer confidence will take a turn for the better this year, vehicle sales will grow accordingly in the country.

Major carmakers share such optimism, especially with regard to NEVs. Great Wall Motors, China's largest SUV maker, expects to sell 1.6 million units this year, up from 1.06 million sold last year. It will launch 10 new NEV models this year.

Volkswagen saw its China sales dip last year, but sales of its electric ID Series more than doubled.

Ralf Brandstaetter, chairman and CEO of Volkswagen Group China, estimates that one in three new passenger vehicles sold in China will be an NEV in 2023, up from one in four in 2022.

"No other markets have seen such rapid NEV growth," Brandstaetter said, adding that the company is speeding up efforts to introduce new models into China this year, including the ID.7 sedan showcased earlier this month at the Consumer Electronics Show held in Las Vega.

By 2030, up to 40 percent of the car group's models in China will be electrified varieties, and it will invest up to 14 billion euros ($15.06 billion) in e-mobility with its Chinese joint ventures by 2024, he added.

Paul Gong, an automotive analyst at UBS, expects passenger NEV sales in China will reach 8.8 million units in 2023, accounting for 38 percent of total passenger vehicle sales.

Gong said the Chinese market is driven by customer preferences instead of subsidies, and more people will be attracted to NEVs as they see more such vehicles on the road.

He said China's NEV exports will further grow in 2023 as well. Last year, carmakers in China exported 3.11 million vehicles, up 54 percent from 2021, of which 679,000 units were NEVs.