CHINA’S vehicle sales grew at a slower pace for the first half of this year as increasing fuel costs and inflation running at a 12-year record high deterred new car buyers.

Vehicle sales expanded by 18.5 percent to 5.18 million units from January to June from a year earlier, the China Association of Automobile Manufacturers said in a report yesterday.

The growth is 4.78 percentage points slower than the same period last year.

Half-year production also increased by 16.7 percent to 5.19 million units compared to 22 percent a year earlier.

The country sold 3.61 million passenger vehicles for the first six months, representing a growth of 17.07 percent over the same period in 2007.

The growth rate, though, was 5.19 percentage points lower than the 22.26 percent recorded at the same time last year, CAAM added.

"The cooling market is within our expectations due largely to the slowing in gross domestic product and a higher consumer price index which curbs purchasing power," said Wang Liusheng, an auto analyst from China Merchants Securities Co Ltd.

"We do not see the market rebounding at a faster rate in the second half with a potential fuel price increase and a reduction in car purchases by government," he added.

Other analysts believed that the declining car prices have triggered a wait-and-see attitude among car buyers at a time when a gloomy stock market has trimmed budgets.

China earlier expected vehicle sales would reach 10 million units this year , up from 8.79 million last year, a low market penetration at the current stage.

Although the sales growth slowed, China remains one of the world’s fastest developing markets, boosting overseas car makers’ sales.