Increasing individual wealth is another reason that domestic brands fell behind, experts said.

In the Chinese car market, the higher the price, the faster sales grow, said Xu Changming, a senior economist at the State Information Center.

Xu told the 21st Century Business Herald that in the first half, sales of cars priced above 300,000 yuan surged 27.3 percent over a year earlier, while sales of cars priced lower than 50,000 yuan decreased dramatically.

Sales are robust in the luxury car segment where domestic carmakers have almost no presence. In the first half of the year, luxury cars accounted for 9.4 percent of all passenger car sales.

Ten years ago, the proportion was only 3.6 percent.

Analyst Zhong noted that Chinese carmakers have made progress in technologies and quality, but still can't keep up with demands from increasingly discerning customers.

Many customers are also making a "once-and-for-all" decision to buy the best car they can afford due to restrictions on new car purchases in some big cities, he said.

Zhang with AutoForesight predicted that the market share of domestic brands will continue to slide.

Domestic brands should invest more in R&D to improve product competitiveness, analysts suggested. They should also seize favorable opportunities in overseas markets, new-energy vehicles and government procurement, they said.

Shen Jun, a senior manager at consultancy Accenture, told the 21st Century Business Herald that domestic brands still have a chance if they can formulate the correct strategy and make good products.

The 30 to 40 domestic car brands at present are not sustainable, he said, adding that it would be better if there were only three to five such brands.