China annual sales growth slowed to 13.6 percent last month, a far cry from the 50 percent-plus growth seen earlier this year and the 38 percent rise in India auto sales on a year ago.

Car sales growth in China might slip to single-digit percent rates in August as the traditional summer sales doldrums set in, and Indian sales were also unlikely to maintain their growth rates given capacity constraints, analysts said.

"Auto sales have always been slow in the summer. But an extraordinary strong 2009 and worries of about the economy are also to blame," Sheng Ye, associate research director at industry consultancy Ipsos' Greater China region said in regard to China sales.

"We might see more traffic at showrooms by autumn, but it won't be anything close to the packed showrooms and explosive sales we saw in 2009."

China's Monthly year-on-year car sales growth since Feb 2010

July 2010  June 2010   May 2010  Apr 2010  Mar 2010  Feb 2010

13.6%          19.4%        25.8%         33.2%       63.2%        55.3%

China auto inventory levels, meanwhile, have been on the rise. Unsold vehicles rose to almost 1.5 million units in the first seven months, up from just under 1 million units from January to April, according to data provided by China Automotive Technology & Research Centre.

A Chinese government think tank had warned earlier in the month that the country's economy will cool further this quarter as fiscal pump-priming starts to fade and the restocking cycle draws to a close.

"It took a combination of factors to slow down China's car market and the economy is one of them," said Lin Huaibin, an analyst with IHS Automotive.

A total of 946,200 cars, vans and sport utility vehicles were sold in July, up 13.6 percent year-on-year, but down 9.3 percent from a month earlier, the China Association of Automobile Manufacturers said on Monday.

INDIA HOT

Car sales in India jumped 38 percent to a record 158,764 units in July, compared with a 30.8 percent gain in June, official data showed.

Four new models were launched in the south Asian country from April, boosting traffic flows at showrooms nationwide, analysts said. However automakers face capacity constraints, a possible rise in interest rates and supply bottlenecks as the festive season draws near, when demand for vehicles peak..

"The two largest carmakers Maruti and Hyundai have limited capacities to scale up production and meet the increased demand," said Jatin Chawla, analyst for institutional clients of brokerage India Infoline.

He said Tata Motors' Nano, which started production from its dedicated plant in western Gujarat, would be a likely beneficiary of the demand as the plant had the capacity to produce 250,000 cars.

The Society of Indian Automobile Manufacturers had last month forecast a 12 to 13 percent rise in car sales in 2010/11, an estimate seen as conservative by analysts.

MARATHON NOT A SPRINT

Many Chinese industry executives, including Hu Maoyuan, chairman of China's top auto group SAIC Motor Corp, however, are sanguine about the outlook for the China market.

"China's auto market is just returning to its normal growth pattern now. Last year's breakneck growth was good but abnormal and, therefore, cannot last forever," Hu told a shareholders meeting in July.

"The market will keep growing at a moderate pace in the coming years. It's a marathon not a 100-metre race, and it's impossible to run marathon like a sprinter."

Amid the on-going slow-down General Motors is held up relatively well, thanks to its broad product portfolio and aggressive push for new models.

The No. 1 Detroit automaker reported a 22.2 percent sales gain in China during July, with sales at its flagship car venture with SAIC jumping 42 percent.

Toyota Motor's China sales climbed just 1 percent which the company blamed largely on a lack of new models.

Warren Buffett-backed BYD slashed its 2010 sales target by 25 percent to 600,000 units after its June auto sales fell by about a fifth from May.

Ford Motor's China car venture, meanwhile, saw its sales fall 6.3 percent in July from a year ago.

"Traditionally, we would see July sales at about 90 percent of June, with August just slightly lower than July, before a September sales bump coming out of the summer season," the U.S. automaker said.