After four straight months of decline, China's auto sales experienced a rally in August, a signal of an upturn in the world's largest auto market.

Vehicle sales in the country grew 6.29 percent month on month to reach 1.322 million units in August, said the China Association of Automobile Manufacturers (CAAM). This represented an increase of 16.14 percent from a year ago.

The August figure brought auto sales in the first eight months of this year to 11.58 million units, up 39.02 percent year on year.

Domestic auto market expansion had been tapering off since the second quarter in part due to a demanding comparison base with last year.

The rebound was expected as the effect of the government's program to subsidize energy-efficient vehicles starts to be felt, said Xu Yingbo, an analyst at the CITIC Securities Co. Ltd.

Meanwhile, the dealers have stepped up promotional offers to clear inventories, said Xu.

The bounce-back in demand could extend into the rest of the year as September and October have always been peak seasons for auto sales, said Dong Yaguang, an analyst at the Sinolink Securities Co. Ltd.

The CAAM even estimated China will retain its throne as the world's top car market and sales could exceed 17 million units this year. The number will skyrocket to 25 million by 2015, accounting for 30 percent of the world's total output, it said.