BYD, backed by US billionaire Warren Buffett, has warned of a slowdown in car sales during the second half of the year and said it would launch new models to lessen the impact.

Sluggish sales in the past few months and high inventory have seen several dealers in Beijing and other areas pulling out of BYD's sales network, a setback for the high-flying carmaker, the China Business News reported, according to Reuters.

BYD chairman Wang Changfu said the China Business News report was exaggerated, adding that dealer churn rates at the automobile firm were at normal levels.

"We have dealers joining and leaving the network all the time," he told Reuters after BYD reported disappointing second quarter results.

The automaker booked a lower than expected 2.6% rise in net profit, down substantially from the previous quarter.

Wang said BYD would focus on developing overseas markets and expand its production capacity of electric vehicles to meet market demand.

Starting next year, the company plans to export large quantities of its E6 electric car to the United States to compete with the likes of Nissan's Leaf and GM's Volt.

BYD, which previously cut its 2010 sales target to 600,000 units from a previous target of 800,000, has prepared for a slowdown in China's auto market, Wang said. But he would not comment on how likely the company is to meet the new target.

"We will launch several new models later this year." he said. "The fourth quarter traditionally is a peak season and sales should pick up."

A large number of BYD's departing dealers have recently left the Chinese automaker's sales network because high inventory tied up their cash, the China Business News said.

Fast expansion of BYD's sales network was also blamed for the closure of BYD dealers in Chengdu and other provinces, including Zhejiang, Shandong and Henan.

"Because of high inventory levels, many dealers are competing to cut prices. We were forced to sell cars even at a loss," the China Business News quoted an unnamed BYD dealer as saying.

Normal inventory is equivalent to sales for 1-½ months, analysts said, while BYD's inventory could double that level.