Passenger car sales in China rose 26% year on year in May, the slowest pace this year.

Growth in what has become the world’s biggest car market started tapering off in April when car sales rose 33%, about half of the pace in March.

Moderate growth is expected for the rest of the year, but considerably slower than last year when sales were propelled by government incentives to boost consumption along with a US$600bn economic stimulus plan.

A total of 1.04m cars, vans and SUVs were sold in May, compared with 1.11m in April, according to the China Association of Automobile Manufacturers.

Analysts expect car sales will return to a slower but more rational growth rate of roughly 20% this year, due largely to pent-up demand in smaller cities where cars are no longer a luxury item as wealth grows.

Separately Volkswagen said it expected to reach its target of 2m vehicle sales annually in China in one or two years, six years ahead of plan.

VW China chief Winfried Vahland told Financial Times Deutschland that sales this year will grow at a similar pace with the market or even faster. Last year VW sold 1.4m units in the country.

In May VW reported a Chinese market share of 17.5%.