Honda Motor Co, Japan's second-largest carmaker, reported sales to dealers in China fell 2.7 percent in June.

Sales fell to 50,113 units in the month, according to an e-mailed statement today, while rising demand for cars pushed up sales 22 percent in the first half of the year, from the same period a year earlier. Honda's China sales also fell 10.3 percent in May from a year earlier, the company said.

Honda's declines in sales come after it announced in May that it would raise production capacity in China by 28 percent to 839,000 vehicles a year by the second half of 2012 and introduce two new models to take advantage of rising demand.

China's wholesale passenger car sales rose 19 percent in June to 1.04 million units, according to a July 9 report by the China Association of Automobile Manufacturers.

Before May, Honda's last monthly sales decline was in March 2009 as the financial crisis undermined demand, according to the company.

Honda gained 3.1 percent to close at 2,687 yen on the Tokyo Stock Exchange. The shares have dropped 14 percent this year, compared with a 9.5 percent decline in the Nikkei 225 Stock Average.