UPDATE 1-China Sept vehicle sales down 1.8 pct yr-on-yr

* September sales down 1.8 percent yr-on-yr

* Last monthly fall was in Nov 2011

* Collapse of Japanese carmakers' sales adds downwardpressure

BEIJING, Oct 10 (Reuters) - Vehicle sales in China fell 1.8percent in September from a year earlier, as Japaneseautomakers' sales collapsed, adding to downward pressures from aslowing economy and rising fuel costs that have weighed on theworld's biggest auto market.

September's was the first monthly fall since January 2012,raising the risk of a deeper slump which would harm Chinese andforeign carmakers alike.

A territorial row between China and Japan, which spurredviolent protests in some parts of China last month as well ascalls for boycotts of Japanese products, hammered Japanese carsales, a shift from which European and South Korean firms havebeen the chief beneficiaries.

Industry-wide sales in China, including passenger cars andcommercial vehicles, totalled 1.62 million vehicles inSeptember, compared with 1.65 million a year ago, the ChinaAssociation of Automobile Manufacturers (CAAM) said onWednesday.

Sales in the first nine months were up 3.4 percentyear-on-year at 14.1 million, according to CAAM.

To encourage demand, the government is likely to launch anew round of incentives to buy mini vehicles with enginessmaller than 1.3 litres, and heavy trucks in rural areas, theofficial journal China Securities News said on Wednesday.

SAIC Motor Corp , Dongfeng Motor Group Co

and FAW Group are the top three automakers in China,selling 3.28 million, 2.33 million and 1.98 million vehiclesrespectively in the first nine months, according to officialdata.

SAIC makes vehicles in partnership with General Motors

and Volkswagen AG ; Dongfeng works with HondaMotor Co , Nissan Motor Co and PSA PeugeotCitroen ; and FAW's partners are Volkswagen and ToyotaMotor Corp .

The backlash against Japanese brands has helped BMW, whose China sales surged 55 percent in September,Volkswagen's Audi which gained 20.5 percent, and Hyundai MotorCo , whose China sales rose 15 percent.

(Reporting by Fang Yan in BEIJING and Kazunori Takada inSHANGHAI; Editing by Daniel Magnowski)

((yan.fang@thomsonreuters.com)(86 10 6627 1233)(ReutersMessaging: yan.fang.reuters.com@reuters.net))

Keywords: CHINA AUTOS/

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