The plan outlined in the report dovetails with the country's long-term strategy of consolidating numerous small regional manufacturers into bigger national auto groups, while at the same time encouraging use of more fuel-efficient, lower-polluting vehicles.

Foreign-brand cars still dominate the Chinese market thanks to a government policy of inviting foreign automakers to partner, as minority stakeholders, with local companies, such as Shanghai Automotive, also known as SAIC.

Foreign automakers including Volkswagen AG, Hyundai Motor Co. and Toyota Motor Corp. have invested billions of dollars in Chinese joint ventures, sharing technology and know-how in exchange for access to the country's potentially huge market.

But the final goal has always been for the country to develop its own brand vehicles.

One aim of the plan is to boost the share of domestic brand auto manufacturers to at least 40 percent from the current 34 percent, the report on the CAAM Web site said.

China's automakers are suffering a slowdown, but not the plunging sales seen in other major markets.

Chinese monthly auto sales surpassed those in the U.S. for the first time in January -- largely because of the sharp drop in American sales.

Total Chinese auto sales last year rose 6.7 percent to 9.38 million units, the first time annual growth had fallen below 10 percent since 1999.

The government's plan calls for nurturing several automakers capable of making more than 2 million cars a year.

Those would include state-run SAIC, which produced about 1.8 million vehicles last year, FAW Group, Dongfeng Automobile Co. and Changan Automotive Co.

The second tier of smaller automakers, with production capacity of 1 million cars or more, may include Beijing Automotive Industry Group, Guangzhou Auto and Chery Automobile Co., among others, according to the report.