Passenger-car sales have been increasing at a torrid rate, making China the world's second-largest vehicle market by unit sales after the U.S. But car companies, rushing to cash in on the growth, have been adding assembly lines at an even faster rate, the planners said.

In a statement, the National Development and Reform Commission, which sets China's industrial policy, said overcapacity is threatening the auto industry's health and laid out guidelines to rein in growth.

For years, China has promoted the auto business, viewing it as a critical driver of economic growth and industrialization, and all kinds of companies - from motorcycle manufacturers to cellphone-battery makers - have started assembling cars. Now, planners fret that the industry frenzy - which has sparked a sharp price war - will inhibit the emergence of manufacturers large and strong enough to compete with established car makers from the U.S., Japan and Europe.

Government officials are also increasingly worried about the environmental and social costs of China's rapid shift to car driving, which has helped shroud cities in air pollution, snarled traffic and contributed to a surge in roadway-accident deaths.

The commission has tried to slow investment in industries before, including auto making and steel, in efforts to keep China's economy from overheating.

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