Vehicle sales in China, which fell by 0.3% year over year in April - the first reversal in two years - fell a further 3% in May, according to the China Association of Automobile Manufacturers as buyers, wary of traffic quotas and rising fuel prices, shunned showrooms.

Sales of cars, trucks and buses fell to 1.38m units in May from 1.44m in May 2010. Demand for passenger cars slipped 0.1% from 1.14m to 1.04m units.

CAAM reported that sales of all vehicles, including heavy trucks and buses, dropped 3% to 1.38m vehicles. This was less than forecast by some analysts but a long way from the double-digit growth seen during most of the past decade.

Earlier this week, the government announced a scrappage incentive scheme to pay between 11,000 and 18,000 yuan (US$1,700-$2,800) for old farm vehicles, city buses and heavy trucks headed for the scrap heap.

An earlier program introduced to fight a downturn during the global crisis helped spur sales in 2009, as China overtook the U.S. to become the world's biggest market for new vehicles. The subsidies were meant to encourage mostly rural dwellers to trade in old cars and trucks for fuel efficient new vehicles, and it sparked a boom in sales of small passenger vans favored by farm and business owners.

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