China has agreed to extend subsidies for car owners who upgrade their outdated vehicles for another seven months to the end of this year to arrest a recent sales slowdown but the extension might have limited impact.

Although details have not been announced, analysts clearly believed the extended incentives were aimed at driving vehicle demand amid slower sales recently. But the impact might be limited, they said.

China launched the one-year scheme on June 1, 2009, offering 3,000 yuan (US$439) to 6,000 yuan subsidies for replacing high-polluting vehicles. The financial package was later raised to as much as 18,000 yuan this year.

The Ministry of Commerce said subsidies totaling 1.7 billion yuan were given for about 127,000 vehicles nationwide by the end of May 31. They helped spur vehicle sales of 15 billion yuan.

"China intends to boost sales and carry out industrial restructuring through the subsidies," independent auto analyst Zhong Shi said.

Auto sales grew an annual 28 percent to 1.43 million units in May, the slowest pace over the past 13 months, according to the China Association of Automobile Manufacturers. May's overall sales fell 7.5 percent from April's.

Zhong said the policy's effectiveness may be limited because the amount of the subsidies is still not attractive enough.

"Car owners are not likely to replace old models when they are uncertain about the future economy with reduced purchasing power," he said.