Automobile sales in China, the world’s biggest car market, may be having their worst start in seven years as a slowing economy and record gasoline prices keep consumers away from dealerships.

Deliveries of passenger autos, including sport-utility vehicles and light-goods vans, in the first two months of 2012 fell 3 percent from a year earlier, based on the median estimate of five analysts surveyed by Bloomberg. That would be the biggest drop since 2005, when they fell 8.9 percent, according to the China Association of Automobile Manufacturers, which will release industry data later this month.

Slumping deliveries in the world’s second-largest economy and Europe are undermining a revival in the U.S., where sales are rising at their fastest pace in four years. In China, which has fueled global growth in the past decade, foreign automakers from General Motors Co. to Volkswagen AG are also facing tougher regulations as the government rolls out policies favoring domestic brands.

“The days of China’s vehicle sales going through the roof are over,”said Huang Wenlong, a Hong Kong-based analyst with BOC International Holdings Ltd. “I don’t think the overall economic situation is that optimistic.”

China’s monthly passenger-vehicle deliveries fell 24 percent to 1.16 million units in January, the most in more than seven years, after an earlier-than-usual Lunar New Year holiday season deprived dealers of a week’s worth of sales. February sales will increase 27 percent from a year earlier, according to the median analyst estimate in the Bloomberg survey.

Lunar New Year

Economists and analysts typically combine statistics for January and February to remove the distortion caused by the holiday, which occurs either month depending on the lunar calendar.

CAAM predicted in January that the country’s passenger-car sales may rise by 9.5 percent this year to 15.9 million units.

“The best scenario is for annual car sales to remain flat, even if the automakers try harder in the latter half,” said Zhang Xin, an analyst with Guotai Junan Securities Co. in Beijing. “The current official forecast for about 10 percent growth doesn’t look realistic.”

China’s gross domestic product expanded 8.9 percent in the fourth quarter of 2011, slowing from a 9.1 percent gain in the previous three months, as the government waged a campaign to tame gains in consumer and housing prices. Growth will be about 8.5 percent this year, according to the Ministry of Industry and Information Technology, the slowest pace since the global financial crisis in 2008.

Fuel Prices

China increased the wholesale price for average 90-RON gasoline to a record 9,417 yuan a metric ton, or $4.20 a gallon, according to Bloomberg calculations based on government data. American motorists paid $3.72 for a gallon of regular gasoline in the week to Feb. 27, according to data from the Department of Energy.

“There are no incentives for consumers to buy,” said Cui Dongshu, Tianjin, north China-based deputy secretary general of China’s Passenger Car Association, an industry grouping. “They worry about their income prospects and there are more and more people delaying their purchase.”

Competition may intensify further among automakers if the government follows through on its proposal to stop buying cars from foreign brands.

Buy Local

All 412 models approved for purchase by state agencies this year will be limited to Chinese brands, according to a proposal disclosed by the industry ministry last week. The preliminary list is open for public consultation until March 9, according to the ministry.

Dongfeng Automobile Co. and Great Wall Motor Co. were among Chinese automakers whose shares surged on Feb. 27 on speculation the government, the nation’s biggest buyer of vehicles, is stepping up efforts to protect its domestic industry as they struggle to compete against global producers such as GM and VW. China stopped offering some incentives on investments from foreign automakers this year to clamp down on overcapacity.

Global carmakers are counting on a rebound in China to help drive earnings this year as auto demand in Europe is forecast to decline for a fifth straight year as the sovereign debt crisis unsettles consumers. Still, sales are accelerating in the U.S., where auto sales last month increased at their fastest pace since February 2008.

Foreign brands accounted for nine of the top 10 car models by sales in China last year, led by GM’s Buick Excelle with 253,500 vehicles, followed by the 247,500 VW Lavida cars sold.

Last month, Ford Motor Co. opened a $490 million passenger- vehicle factory in China on Feb. 24, increasing the automaker’s manufacturing capacity in the country by a third to more than 600,000 vehicles annually. The company’s annual sales rose 7 percent to 519,390 units last year.

GM, the biggest overseas automaker in China, is poised to receive approval to build a 7 billion-yuan factory in the central city of Wuhan, according to a statement by the provincial government last month. The plant will have annual production capacity of 300,000 vehicles.