Hongqi H7 sedan's 2013 sales bumpy

FAW displays Hongqi H7 at Chengdu Motor Show

"It will give struggling homegrown brands confidence to further develop amid competition from foreign rivals," Jia said.

Auto analyst Zhang Zhiyong told China Daily that moves like Hongqi's replacing Audi in both military and official fleets will help Chinese brands to compete in the high-end passenger vehicle segment.

China Association of Automobile Manufacturers data show that the combined market share of China's homegrown automobile brands has been declining for seven months.

In the first quarter, homegrown brands' market share dropped 4.54 percentage points year-on-year to 38.72 percent in the passenger vehicle market, and fell 6.23 percentage points in the sedan segment.

And while German, US and Japanese automakers enjoyed a more than 20 percent annual growth, domestic producers' total sales in the first three months in the passenger vehicle sector dipped 1.46 percent year-on-year.