Sales climbed 3% to 28,878,900 units, data released Thursday by the China Association of Automobile Manufacturers shows. This is 70% higher than sales in U.S., China's closest competitor in market size, and 5.5 times the Japanese figure.

Passenger vehicle sales rose 1.4% to 24,718,300. Sedan sales slid 2.5% to 11.84 million, owing partly to a drop-off from a surge in demand in the latter half of 2016 before the government scaled back a tax break on small cars. Consumers were also increasingly drawn to good-looking sport utility vehicles -- sales of SUVs jumped 13.3% to 10.25 million, making up more than 40% of all passenger vehicles sold.

Nissan Motor and Honda Motor enjoyed double-digit growth after getting a jump on the competition in expanding their SUV offerings, catering to Chinese consumers paying closer attention to performance and exterior design. Six Japanese automakers sold a combined 4.8 million vehicles in China last year -- close to the size of the entire Japanese market.

General Motors, which is vying for the top spot in China, reached annual sales of more than 4 million vehicles for the first time last year thanks to beefed-up lines of SUVs and luxury cars. Though Volkswagen has not yet announced Chinese sales figures for the year, it likely topped the 4 million mark as well.

But Hyundai Motor ceded third place to Nissan amid boycotts of South Korean products in retaliation for Seoul's hosting of an advanced U.S. missile defense system. The South Korean automaker's sales tumbled 36% to 1.14 million vehicles.

"New-energy" vehicles, a category including electric cars and hybrids, saw sales swell 53.3% to 777,000. These vehicles are given special treatment in the license plate lottery and auction systems used by cities including Beijing and Shanghai to ease gridlock, making them an attractive option for urban consumers.

The Chinese market for new-energy vehicles is led by domestic early movers with their own brands, such as BYD, BAIC Motor and Geely Automobile Holdings. The government plans to implement sales and production quotas for new-energy vehicles in 2019, eyeing sales of 2 million units in 2020. The market's rapid growth looks set to continue this year as even big international players rush to develop new offerings for Chinese consumers.