More than half of China's listed auto companies enjoyed an improved first half performance in 2013 over last year with higher net profits compared with a year ago.

First half financial reports from 38 of the 62 listed companies showed improving sales and profit margins. Electric carmaker BYD saw a surge of more than 10-fold in net profits while others, including Great Wall Motor, CNHTC and Zhongtong Bus soared by more than 50% year on year.

Demand in the domestic auto market has shown signs of recovery in the first six months. Data from the China Association of Automobile Manufacturers (CAAM) show that production and sales in China in the January-June period both topped 10m units.

Output and sales stood at 10.75m and 10.78m units respectively, up 12.8% and 12.3% from the first half of 2012.

Despite the strong performance, the industry is facing increasing head winds as growth slows and domestic brands continue to lose market share to foreign makers.

The government is also planning to increase sales restrictions in up to eight more cities - Tianjin, Shenzhen, Hangzhou, Chengdu, Shijiazhuang, Chongqing, Qingdao and Wuhan - aimed at easing gridlock.

CAAM estimates that car sales could be cut by as many as 400,000 units annually if the new policy comes into effect.