BEIJING -- A recent weakening in China's auto sales could be signaling tougher times ahead for its booming car industry -- and for the Chinese consumer.

It also comes at a bad time for General Motors of the U.S., Volkswagen of Germany and Toyota Motor and Honda Motor of Japan, which all have boosted production in China to sustain their growth and offset lackluster sales at home.

The global auto industry is suffering this year as worsening economic prospects lead consumers world-wide to hold off on big purchases. In the U.S., car sales in the first half of 2008 fell 10.1% from a year earlier; in Europe, they fell 2%, and in Japan, 0.9%.

China's vehicle sales, by contrast, increased 18.5% in the first half to 5.2 million units. Growth in sales of passenger vehicles alone was slightly weaker at 17.1%. Sales in April and May were sluggish, and vehicle purchases in June slowed, totaling just over 15% above the number a year earlier.

Auto sales are cyclical, and China's recent slowdown isn't yet as dramatic as some previous episodes. But with fuel prices rising and China's overall economy slowing, the automobile market is increasingly expected to cool. On Wednesday, the government said it will raise taxes on vehicles with high emissions.

"The high-growth period for China's auto industry has already passed, and will not return," says Yao Hongguang, an analyst for United Securities in Shenzhen.

Sales are likely to rise about 15% this year, Mr. Yao says, before moderating to 12% to 13% growth in the medium term. That is well down from the 22% growth last year and the 24% jump in 2006, and could pose a problem for businesses that had banked on the boom continuing.

Some slowing in China is probably inevitable now, given the sheer size of the market. Annual sales of vehicles have doubled in four years, reaching 8.8 million in 2007 from 4.3 million in 2003. In the process, China overtook Japan as the world's second-largest vehicle market after the U.S.

The recent trend in car purchases is being watched closely as a sign of a possible weakening in consumer spending -- which has helped keep China's economy growing at more than 10% this year, even as its exports suffer. The surge in food prices is likely to leave lower-income households with less money to spend on other things. Higher-income households also could be feeling the squeeze from the drop in the local stock market -- down 46% this year -- and a softer real-estate market.

The picture for consumer spending is mixed. Even after taking account of higher inflation, retail sales are rising by 14% to 15% so far this year, picking up from the 12% to 13% pace in 2007. Yet government surveys of consumer confidence and household spending show a declining trend.

"The expectation of slower growth this year is one of the reasons behind the slowing trend in car sales in China. Consumer expectations of further rises in fuel prices will also suppress the demand for cars," says Li Chunbo, an analyst with Citic Securities in Beijing. Government-set prices for gasoline and diesel were raised in June, and are widely expected to go up again as they remain below international levels.

Even if growth in auto purchases doesn't slow much, manufacturers who had been counting on faster growth could end up with excess capacity. "Demand is still growing at double-digit rates, it's very strong. The reason I am concerned is that the capacity growth is even stronger," says Sun Mingchun, an economist for Lehman Brothers in Hong Kong. "I think the auto makers were too optimistic in the past few years, and built up too much capacity."

Investors appear to agree, and have punished the stocks of leading Chinese auto makers. SAIC Motor, which has joint ventures with General Motors and Volkswagen, has seen the price of its Shanghai-traded shares drop 68% this year. Hong Kong-listed Denway Motors, which owns half of a Honda plant in Guangzhou, is down 42%. Shares in the Chinese partner of BMW, Brilliance China Automotive Holdings, are off 47%, also in Hong Kong.

Excess capacity could put downward pressure on car prices just when manufacturers are facing surging costs. Car makers in China are facing a 5% increase in tire prices, a 10% increase in glass prices, and a more than 40% increase in prices for plastic and steel, according to estimates by Orient Securities.

And manufacturers already are struggling to adjust to the evolution of Chinese consumer preferences. First-half sales by unlisted Chery Automobile, a manufacturer of domestic-brand cars that has specialized in vehicles costing less than 80,000 yuan ($12,000), increased just 0.7% from a year earlier, according to the China Association of Automobile Manufacturers. Analysts say the lower-income market is most sensitive to the rise in fuel costs.

Industry analysts report that Japanese brands such as Toyota and Honda are gaining market share this year, while the local market share of General Motors and Volkswagen appears to be declining slightly.

A vehicle manufacturer that many analysts still like is newly listed Sinotruk (Hong Kong), an arm of state-controlled China National Heavy Duty Truck. The stock, which was listed in Hong Kong in November, has fallen 37% this year.

One reason some brokerages are positive about Sinotruk is that its nonpassenger vehicles serve a business market and don't depend on consumer demand.

"There is a strong correlation between China's heavy-truck demand growth and China's fixed-asset investment growth," says Frank Li, head of Asian auto research at J.P. Morgan Chase.

As the government can keep investment growth high with new public-works projects, it could prove more resilient than exports or consumer spending, he says.