Passenger car sales in China will grow 8% to 22 million annually by the end of 2020, fueled by SUV sales and rising incomes in smaller cities, a McKinsey report says.

During the decade through 2020, China will be responsible for 35% of the growth in global auto sales, and within China, consumers in third and fourth-tier cities will push up sales.

SUV sales in China will double in the 10 years starting 2011 becoming the most popular vehicle type in the country as richer Chinese turn to larger cars. SUVs will represent 20% of total auto sales in China by the end of 2020, McKinsey predicts.

As residents earning more, auto sales in smaller cities as a percentage of total sales will surge to 60% by the end of this decade from 40% at present.

Chinese consumers have begun buying larger and pricier cars and more will prefer upscale models in the future, according to a McKinsey analyst.

The world's top 10 automakers have invested at least $38.4 billion in China over the past two years, aimed at taking advantage of the booming market, McKinsey says.

Car ownership in China will reach half of that in the United States by 2020, McKinsey predicts.

Passenger car sales rose 5.2% to 14.5 million units in China last year, according to the Chinese Association of Automobile Manufacturers. In the first 10 months of this year, 15.7 million vehicles including 12.6 million passenger cars were sold, up 3.6% and 6.9% respectively from the same period of last year.

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