Visitors examine a plug-in hybrid SUV at an auto show in Shenzhen, Guangdong province.[Photo/China Daily]

Once the policy expires at the end of this year, the association said, it is unknown whether a similar policy will be put in place to influence customers' purchasing.

China implemented the policy on Oct 1, offering a 50 percent reduction in new vehicle purchase tax for vehicles with engines no larger than 1.6 liters.

Statistics from CAAM show that the sales of vehicles with engines between 1 liter and 1.6 liters from October to December surged 25.8 percent year-on-year, much higher than the 6.8 percent growth in the earlier months of 2015. The sales of vehicles with engines smaller than a liter rose 9.2 percent year-on-year from October to December. January to September recorded a 39.2 percent year-on-year decrease.

"Using smaller engines is not the best way to lead energy-saving and emissions reduction, but it is the simplest way," said Dong Yang, executive vice-president of CAAM, who said the tax-cut policy has had a clear effect on the government initiative of saving energy and reducing emissions.

Dong said the sales increase in the sector in the last quarter of 2015 demonstrates people's basic needs of owning a vehicle.

Demand for larger vehicles

SUV sales volume in China reached 6.2 million units, a surge of 52.4 percent from 2014, and the MPV segment expanded 10 percent to 2.1 million units.

Wu Shaoming, secretary general of CAAM, said customers' preferences moving toward SUVs and MPVs is a worldwide trend. "Automobiles are developing beyond just mobility. It is more a feel or experience, especially for those who are buying their second car. The car is now a mobile home."

He spoke of his own experience: "Sitting in an SUV, I feel different. I'm up high there when sedans are around. After driving an SUV, I feel like sitting on the ground in a sedan." Wu forecast that the next trending segment in the market will be MPVs. "A family may have two kids in the future, and needs to carry more people in a spacier vehicle. They probably want to lay down the seats to rest during a trip."

SAIC-GM-Wuling's Hongguang compact MPV topped the Chinese passenger car market for a 10th year in 2015, with more than 655,500 units sold, accounting for 5.6 percent of the total share.