China’s car market slowed dramatically in the first half of the year according to data released by the China Association of Automobile Manufacturers (CAAM).

CAAM said that vehicle sales in the first six months of the year hit 9.32m units, up 3.35%  on the previous year. The market was up by around a third in 2010, but market analysts say demand is now cooling in response to government measures to government measures designed to ease inflationary pressures. The Chinese central bank raised interest rates again last week, the third raise this year.

The Chinese vehicle market is also reeling from increases to operating costs – especially fuel prices – and restrictions on sales in some cities.

However, the month of June saw a rebound in both auto output and sales, the first increase after two straight months of declines. Auto sales topped 1.44m in June, up 1.4% year-on-year; output stood at 1.4m vehicles, just 0.65% up on last year.

Dong Yang, secretary-general of the CAAM, said the market is becoming “more rational and healthy” as it enters a period of stable growth.

Auto sales in the second half of the year will be significantly higher than those of the first half,with annual auto sales expected to grow by 5%, Dong said.