China's auto sector had a bumper year in 2016 as vehicle sales increased 13.7 percent, the fastest growth rate in three years. However, the outlook for the coming year is rather tepid as the government has announced phasing out tax incentives on vehicle purchase.

China, which is one of the world's biggest auto markets, has reportedly sold 28 million vehicles in 2016. The China Association of Automobile Manufacturers said on Thursday that the numbers are likely to grow 5 percent in 2017 to touch 29.4 million units.

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Chen Shihua, a spokesman for the association claimed, "Monthly sales clearly grew year-on-year for every month with the exception of February, with cumulative sales and production growing in a straight line."

The report also revealed that sales of Chinese brands passenger cars showed 21 percent growth to reach 1.26 million units in the month of December.

The sales volume was lifted by several incentives including the reduction in sales tax on cars with engines of 1.6 liters or below. The rate was slashed from 10 percent in 2015 to 5 percent in 2016. However, in 2017, the rate is expected to be 7.5 percent. It will be restored to 10 percent in 2018.

The country also recorded increase in the sales of electric and hybrid vehicles. The segment grew 53 percent to touch 507,000 units mark. However, the segment is likely to suffer in 2017 as incentives for passenger cars are slashed. Honda Motors saw 24 percent increase in its sales, outnumbering its major peers. 

Tagsthe China Association of Automobile Manufacturers, Honda Motors, Electric cars