SHANGHAI - China's passenger car sales slowed in January as tax breaks for energy-efficient cars lapsed and cities began tightening curbs on vehicle use to help combat traffic congestion and smog, according to a report Monday.

The Shanghai-based China Passenger Car Association reported that sales of passenger cars fell 10.3 percent in January from the month before to 965,238. On an annual basis, sales rose 12.6 percent.

Chinese bought 13.7 million passenger vehicles last year, up by a third from 2009. But that robust growth is forecast to cool this year due to the expiration of tax incentives for some vehicle purchases and a renewed effort by cities to bring traffic under control.

"Of course the withdrawal of financial incentives would impact any country's auto market, and sales did continue to grow in January, but toward the end of the month there was a sharp cooling in sales," the Passenger Car Association report said.

It said sales in February were bound to decline due to the usual slump following the Lunar New Year holiday, which was longer than usual.

Rao Da, head of the association, took aim at what he called a policy of "encouraging car purchases, while restricting car use."

The explosive growth in Chinese car ownership has nurtured the rise of the domestic auto industry, but left major cities like Beijing and Shanghai jammed with traffic and choking on smog.

China's capital has decreed it will limit new vehicle registrations to 240,000 this year — just over a third of those registered in 2010 — to try to ease massive traffic jams that have turned Beijing's streets into virtual parking lots.

News that Shanghai would more strictly enforce existing restrictions on vehicles with out-of-town license plates, often bought by city residents to avoid paying exorbitant fees in monthly auctions, boosted the average price for a plate to 44,000 yuan ($6,666) last month, local reports said.

As of January, the government ended sales tax rebates and subsidies for rural buyers, which initially fueled huge growth in sales of minivans in the countryside after they took effect in 2009. That is expected to dampen demand in coming months.

But most auto manufacturers are banking on solid growth in the country's vast rural areas and inland cities, where most families do not yet own cars and those that do are keen to trade up.

Foreign manufacturers are still counting on double-digit growth in China and other emerging markets to compensate for sluggish sales in their home markets.

General Motors Co., which for the first time in its 102-year history sold more cars and trucks in China last year than it did in the U.S., reported sales in China rose 22.3 percent from a year earlier in January to 268,071.

Ford Motor Co.'s sales climbed 20 percent, to 53,340 vehicles.

While domestic auto companies are growing quickly, they have yet to overtake foreign car makers and their joint venture partners: Six of the nine top car manufacturers by sales in January, according to the Passenger Car Association, were joint ventures, led by GM and its flagship joint venture with state-owned Shanghai Automotive Industrial Corp., Shanghai GM.

The top sellers among independent domestic brands was Chery Automobile, which sold 49,640 vehicles in January. Just behind was BYD Auto, a battery maker-turned-car manufacturer backed by billionaire U.S. investor Warren Buffet, which sold 49,432.