China's passenger vehicle sales rose 4.3% in September from a year earlier, snapping five months of decline with a boost from a government subsidy to encourage trade-ins as part of a broader stimulus package.

All the gains came from battery-powered vehicles, whose buyers and manufacturers have benefited since July from a doubling of subsidies to consumers, while sales of gasoline cars in China, a market foreign brands once dominated, continue to shrink.

Sales in the world's biggest auto market hit 2.13 million vehicles in September, up from 2.04 million a year earlier. For the first nine months, sales were up 1.9% from 2023 levels, according to data from the China Passenger Car Association (CPCA).

Sales of electric vehicles and plug-in hybrids jumped 50.9%, accounting for 52.8% of overall sales. It was the third month in a row that battery-powered vehicles including plug-ins outnumbered sales of gasoline-engine cars in China.

Gasoline car sales in September were above 1 million, up more than 100,000 from August. But that was far short of September last year, when over 1.29 million were sold in China.

Sales of EVs and plug-in hybrids - a category the Chinese industry group classifies as "new energy vehicles" - hit 1.12 million in September and 7.13 million for the first nine months.

Global EV sales have slowed this year with automakers outside China scaling back production.

Sales in China, however, have risen, driven by expanded subsidies for consumers trading in older vehicles for EVs and more fuel-efficient cars - a programme likened to the U.S. "cash-for-clunkers" stimulus in 2009.

Tesla sold over 72,000 vehicles in China, up 66% year-on-year, its best month this year. The U.S.-headquartered company exported 16,121 China-made vehicles in September, down from over 23,000 the previous month.

Tesla, which counts on China for about a third of its sales, has added its own incentives, including zero-percent financing.

Chinese EV makers BYD , Li Auto and Xpeng recorded their best-ever month in September.

China's best-selling new energy vehicle makers through the first eight months were BYD, Geely and Tesla.

China's government announced in July a subsidy of more than USD 2,800 when consumers scrap an older car to replace it with an EV, doubling a subsidy introduced in April. The subsidy for a more fuel-efficient combustion vehicle is just over USD 2,100.

As of late September, 1.1 million consumers had registered to take advantage of the subsidies.

Cui Dongshu, secretary-general of the CPCA, said on Saturday that he expects a strong fourth quarter on trade-in subsidies by local governments.

But car sales data also published on Saturday by the Chinese Association of Automobile Manufacturers (CAAM), another industry association, was less upbeat.

Vehicles sales last month in China fell 1.7% from a year earlier, according to CAAM data, which counts commercial vehicles like trucks as well as passenger cars.

Commercial vehicle wholesales, including exports, plunged 23.5%, worsening a 12.2% slide in August, CAAM data showed.

The government will "significantly increase" debt issuance to boost the world's second-largest economy, Finance Minister Lan Foan said on Saturday, as it seeks to lift faltering growth back towards its target of around 5%. China's central bank has announced interest rate cuts and liquidity injections in its largest easing since the COVID-19 pandemic.

An open question is whether China will channel more stimulus to support the purchase of EVs, a sector officials have identified as a priority.

The finance ministry plans to issue 1 trillion yuan (USD 140 billion) of special sovereign debt, using part of the proceeds to increase subsidies for the consumer goods trade-in programme and for business equipment upgrades, Reuters has reported.

Car exports grew 22% in September, bringing sales for the first nine months to 3.55 million vehicles, despite a political backlash against Chinese automakers in major overseas markets.

China overtook Japan to become the world's largest vehicle exporter last year. U.S. officials and others have argued China's capacity to make more cars than it can sell at home combined with past subsidies give Chinese EV makers an unfair advantage.

The European Union is pressing ahead with tariffs of up to 45% on Chinese-made EVs after a vote last week, a move opposed by Germany. China has said it hopes to avoid tariffs through negotiations that would set minimum EV sales prices in Europe.

The United States and Canada have each set tariffs of 100% on Chinese-made EVs that effectively lock them out of those markets.