Car sales in China climbed a modest 4.5% year on year in March, down sharply from a hefty gain in February, as a slowing economy and higher fuel prices kept customers away from showrooms.

Sales declined 1.3% in the first quarter, in a downtrend that started in January when automakers and dealers cut working hours during China’s lunar new year holiday, Reuters noted.

Weak sentiment may continue into the second quarter, but new car launches planned for after the week-long Beijing autoshow, which kicks off on 23 April, will bolster auto sales, industry observers say.

“March was never a very good month for car sales. Now that the government cut the GDP target and raised fuel prices, you can imagine the psychological impact that could have on people who are thinking about buying cars,” Sheng Ye, associate research director for Greater China at industry consultancy Ipsos , told the news agency.

In mid-March, Chinese premier Wen Jiabao cut the country’s 2012 GDP growth target to 7.5%, the lowest since 1999, to steer the economy to a more balanced growth pattern.

Days later, the government raised retail petro; prices for the second time in six weeks, making them about 25% higher than the average price in the United States.

Higher fuel prices might have little impact on the moneyed class but the price hikes are giving others pause.

In March, 1.4m sedans, SUVs, MPVs and mini vans were sold in the country, the China Association of Automobile Manufacturers (CAAM ) said. In the same month a year ago, that number was 1.34m.

The March 2012 tally compared with 1.16m and 1.21m sold in January and February, respectively, according to CAAM. In February 2011, only 967,200 vehicles were sold, partly because of the lunar new year effect.

Deliveries in the first quarter came to 3.77m, compared with 3.84m a year earlier.

CAAM did not revise its full-year forecast of 8% growth for China’s vehicle market but left open the possibility that the full-year growth rate could turn negative.

“Given the situation in the first quarter, I think chances that we will see growth for the full year are bigger than a decline,” Dong Yang, CAAM’s secretary general, said at a briefing on Wednesday.

Industry consultancy LMC Automotive Co cut its forecast for Chinese passenger car sales growth to 9% from 10.9% after Wen announced a lower economic growth target for the year.

“Our previous forecast was based on GDP growth of 8.5%. A 1% change is going to have a fairly big impact on car sales,” John Zeng, Asia Pacific chief at LMC, told Reuters.

“For the overall vehicle market, the growth rate this year would certainly be lower than 9% as commercial vehicles have been declining since 2011.”

LMC has excluded mini-vans in its passenger car sales forecast of 2012. It if included mini-vans, the projected growth rate would be much lower since mini-vehicle sales showed an annual decline of 8.5% in the first quarter.

Still, some industry executives, including Xu Ping, chairman of Dongfeng Motor Group Co, remain sanguine about the outlook, banking on better sales in lower-tier cities and demand for new models.

Xu expected China’s vehicle market to rise 8% in 2012. Dongfeng, a Chinese partner of Nissan Motor and Honda Motor , would grow 15%, thanks to the planned launch of nine new cars within the year, he told Reuters.

Chen Hong, president of SAIC Motor , was also confident that the top Chinese automaker could continue to outpace what he projected to be a 7-8% gain in the market.