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Ford Motor Co. is the second Detroit auto maker to say it ended last year on a high note in China, reporting a 27% increase in December sales, as automobile demand continues to rebound in the world's biggest light-vehicle market.

Ford's December performance caps a record year for the No. 2 U.S. auto maker, following a late-year surge by General Motors Co., which sells more than three times more vehicles in China than its smaller crosstown rival.

For the year, Ford's China sales topped 1 million units and increased 3%, compared with the same period a year ago. The company said the launch of its Lincoln luxury-car brand in China got off to a good start in 2015.

The Dearborn, Mich.-based auto maker is a latecomer to China. GM, Germany's Volkswagen AG and others entered the market with products decades ago and have been expanding capacity and sales channels ever since.

Ford will continue to grow its footprint in China, particularly for a Lincoln premium brand scrambling to catch up to GM's Cadillac, Daimler AG's Mercedes-Benz, BMW AG and others. Ford's 11,630 Lincoln deliveries in 2015 equaled a fraction of the 79,779 Cadillacs sold over the same period.

Ford aims to have 60 Lincoln dealerships in 50 cities by year-end, and it will introduce the Continental sedan to the market this year. The Continental will battle against Cadillac's CT6, which hits showrooms this year as well.

Outside of the U.S., China is considered one of the most profitable markets in the world. But China, like a handful of other emerging markets, provided its share of turbulence to the global auto industry in 2015.

Long billed as the world's most promising light-vehicle market, China's rapid auto sales growth slowed, with car companies reporting sluggish volumes early in the year and rare sales declines in the summer months. Volumes rebounded in the fourth quarter of the year, however, as new tax incentives led to what LMC Automotive calls a "V-shaped rebound."

Local auto makers selling so-called new energy vehicles, such as electric cars, are benefiting from policies aimed at sparking sales of more efficient products. SUVs and crossover vehicles—segments where some non-Chinese auto makers thrive—have also been strong.

Not every auto maker is enjoying an upswing, however. Volkswagen, one of the dominant players in China, reported a 2.1% decline in December and a 3.4% decline over the course of the year.

VW, rocked by a global diesel-emissions cheating scandal, said it sold 3.55 million vehicles in China last year, compared with GM's record 3.61 million. GM reported a 14% increase in December sales and a 5.2% increase for the year.

Full Chinese light-vehicle sales statistics are due later in January. Several auto makers posted sales gains in December and the 2015 calendar year, according to a roundup of results published by WardsAuto.com. Japan's Honda Motor Co. and Nissan Motor Co. were among the winners in last year's sales chase.

Meanwhile, auto makers and analysts have a muted view on 2016's prospects. Toyota Motor Co. has led the companies calling for growth rates this year well below the high-single-digit percentage increase estimated for 2015. Barclays' auto analyst Brian Johnson said he expects growth in China to be "at a more tapered level than earlier in the decade and a lower absolute volume than most would have expected a year ago."

The sales pace in the final months of last year was sizzling. Car makers in China shipped about 2.2 million passenger vehicles in November, a 24% increase over the same period a year earlier. That jump was largely because of Beijing's halving of the purchase tax on small cars to 5% from 10%, covering about 70% of the vehicles sold in China.

Still, analysts are concerned about a glut of capacity. Credit Suisse for instance, estimates there was a sharper increase in production than sales in November, helping drive up sales incentives and stoking fears that a price war in China will accelerate.

"Optimism for sales activity in the Chinese market has increased dramatically since the government announced measures to reduce the vehicle purchase tax," IHS Automotive said in a forecast issued on Friday. "However, continued stock market volatility may intimidate some buyers." The firm now expects light vehicle sales growth to increase 5% to 6% in 2016, enough to add more than 1.3 million units of additional sales.

Write to Anne Steele at Anne.Steele@wsj.com and John D. Stoll at john.stoll@wsj.com

(END) Dow Jones Newswires

January 08, 2016 14:25 ET (19:25 GMT)

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