BYD has slashed its car sales forecast for the year by 25 per cent, becoming one of the first major carmakers on the mainland to hit the brakes in reaction to slowing sales growth and rising inventories in the world's biggest car market. BYD, which counts Warren Buffett as a major backer with a 9.9 per cent stake, is targeting annual sales of 600,000 vehicles, down from 800,000, mainland media reported, quoting a company spokesman. The mainland car market has been softening since March. After surging to overtake the United States last year and peaking in the first quarter this year, sales of passenger cars have cooled in recent months as the effects of a raft of government subsidies and tax breaks on car purchases begin to wane. The current slowdown may represent 'a 'payback' factor following the frenetic growth of 2009', analysts at vehicle consultancy JD Power and Associates wrote in a recent report. Sales have decelerated fastest among the small-engine cars that had benefited most from last year's tax breaks, they noted. 'This could indicate that the purchase tax cut pulled forward future demand, rather than creating fresh demand,' the analysts wrote. Several carmakers that saw their sales volumes nearly double only a few months ago are now contending with flat or negative growth. Leading brands including Chery, Geely and Buick saw sales volumes decline in June, as did strike-hit Japanese brands Honda and Toyota. BYD's own sales grew 67 per cent in the first half of the year but have slowed progressively and rose only 3 per cent in June. The Shenzhen-based company's market leading F3 compact car, which retails from 59,800 yuan (HK$68,450) and accounted for more than half the cars sold by BYD in the first half, saw sales volume plunge 30 per cent in June as rivals launched competing models. 'This segment of the market grew really fast last year, and companies used that as the base for this year's sales targets,' said Yu Bing, a Shanghai-based analyst with Ping An Securities. Given the recent slowdown 'there were bound to be some difficulties achieving these goals', he said. In addition to its popular and reasonably-priced hatchbacks and sedans, BYD is at the forefront among homegrown carmakers in ramping up production of new energy vehicles. This green car segment also benefits from strong government support, as manufacturers of plug-ins and other electric-powered cars can benefit from state subsidies of up to 60,000 yuan per vehicle. Analysts see longer term potential to BYD's push into environmentally friendly cars, including its aggressive plans for the all-electric E6 and the manufacturing of batteries for electric cars. But those efforts are unlikely to add significantly to near term profit or offset the effect of slowing sales of traditional passenger cars. 'The strong headwind in [car] demand overshadows new energy promises,' JP Morgan analysts wrote last month in a report downgrading BYD's shares to 'neutral'. BYD's shares have fallen 31.8 per cent since April, shedding 1.4 per cent yesterday to close at HK$55.80.