Passenger vehicle sales in China continued to surge in January, registering a 15 percent increase over the same month last year.

The increase came despite central government putting an end to tax incentives for buyers of small cars and subsidies for trade-ins, and launching a quota policy in Beijing to curb car purchases.

Analysts said that strong demand in the second- and third-tier cities has offset stagnant sales in big cities because of the policy limitations.

Total domestic sales of cars, sports-utility vehicles, multi-purpose vehicles and minivans increased by 15.3 percent to 1,402,764 units in January from a year earlier. However, the figure was 4.8 percent lower than that in December, said the China Passenger Car Association on Monday.

Last week, General Motors reported a record month in January, as its two largest manufacturing joint ventures and major vehicle brands all reached new monthly highs for unit sales.

The US automaker sold 268,071 vehicles in the domestic market in January. This represented an increase of 22.3 percent from the first month of last year and topped GM's previous monthly sales record of 230,038 vehicles set in March 2010. The company ended January with an estimated domestic market share of 14.7 percent.

Ford Motor Co said that its vehicle sales in China stood at 53,340 units in Januaryrising 20 percent from a year earlier, driven by sustained demand for its flagship "Focus" model.

Meanwhile, the luxury-vehicle segment continued to lead the industry with robust sales growth.

Following a record-breaking sales performance in 2010, Mercedes-Benz started 2011 with year-on-year sales growth of 89 percent for January, delivering nearly 15,330 units of Mercedes-Benz, Smart, AMG and Maybach on the Chinese mainland.

BMW AG officially delivered 20,308 vehicles on the Chinese mainland last month, representing an increase of 70.4 percent from the company's sales in January 2010.

However, Rao Da, secretary-general of the association warned that the increasing inventory to dealers might lead to a decrease in sales over the coming months.

He also said that the Spring Festival holiday and a possible petrol price hike might result in a 35 percent year-on-year negative sales growth this month, and could add more pressure to the inventory.

Rao even predicted a possible negative year-on-year sales growth in China's automobile industry, the first for two decades, because of excessive consumption during the past two years provoked partly by the government's incentive policies.

The China Association of Automobile Manufacturers, which will release sales figures for the entire industry on Friday, predicted that whole-year growth will slow to 10 to 15 percent, after domestic auto sales jumped 32.37 percent to 18.06 million vehicles in 2010, overtaking the United States for a second consecutive year. Rare-earth industry to be regulated