Demand for new cars among consumers in China has dropped off this year according to new research.

Figures from JP Morgan Chase & Co predict that sales will increase by around 20 per cent this year.

This is compared to a year on year increase of 76 per cent in 2003.

The figures also suggest that next year will see a further drop off in demand with a sales increase of less than three per cent.

"Some of the decline can be explained statistically," Ashvin Chotai, an automotive analyst with Global Insight told the Shanghai Daily. "After two heady years, the rate had to come down."

China's CITIC Auto Industry Index, which tracks listed vehicle manufacturers, has dropped 44.35 per cent since the start of this year.

"People are holding off on buying cars. Investors are holding off on buying auto shares," Haitong Securities analyst Hu Song told the Xinhua news agency.