Dusseldorf: Bayerische Motoren Werke AG, Daimler AG and Volkswagen AG and led a decline in European automakers' stocks after Beijing's city government decided to limit the number of new passenger cars to ease road congestion.

BMW, the world's leader in luxury car making, slumped as much as 5.8 per cent in Frankfurt trading, the steepest intraday decline since May 19.

Daimler fell as much as 5.1 per cent, the biggest drop since July 27. Preferred shares of Volkswagen, Europe's largest carmaker, dropped as much as 5.4 per cent.

Beijing, ranked as having the world's worst traffic congestion, will issue a quota of 240,000 new vehicle licence plates through a lottery system next year, with about 88 per cent allocated to individual buyers, according to a December 23 statement.

The quota is one third of the number of new passenger cars registered this year, said Shin Chung Kwan, an analyst at KB Investment and Securities.

"It remains to be seen to what extent traffic limitations are eventually realised but it's possible that Beijing may only be the beginning," said Juergen Pieper, a Frankfurt analyst with Bankhaus Metzler who recommends buying VW, Daimler and BMW shares.

"There's no doubt that this announcement is creating a considerable element of uncertainty."

BMW was down 4.2 per cent at ¤60.59 as of 12.44pm. Daimler, whose Mercedes-Benz division ranks second among luxury brands after BMW, fell 3.9 per cent to ¤51.95. VW declined 4.8 per cent to ¤122.

Volkswagen, counting China as its biggest market, said last month that its two joint ventures in the country would spend ¤10.6 billion (Dh51.2 billion) in the world's biggest auto market through 2015.

It would add two factories to help double production to three million cars a year.

VW has nine Chinese plants and its 11-month sales in the country, including Audi, Skoda and VW brands, surged 38 per cent from a year earlier to 1.82 million vehicles.

Volkswagen's global spending plans in the next five years total ¤51.6 billion, including ¤11.6 billion outlined by Audi on Monday.

Mercedes-Benz delivered 130,100 vehicles in China between January and November, a surge of 119 per cent, to beat the company's full-year target of more than 120,000 deliveries. The Stuttgart, Germany-based carmaker's sales-growth rate in China has doubled this year to make the Asian nation Mercedes-Benz's third-largest market after Germany and the US.

BMW will add smaller models at its Chinese factories, which will have capacity to build as many as 300,000 vehicles annually by 2013, more than triple the Munich company's sales in the country last year.

BMW's Chinese sales more than doubled last month to 17,302 vehicles.

"China still is, and has for some time, been the main cause for German carmakers' booming business," Pieper said.

"Should some of this momentum now really be capped, then this would surely ring an alarm bell."

PSA Peugeot Citroen, Europe's second-largest carmaker, fell as much as 3.5 per cent to ¤28.41 in and was down 1.8 per cent in Paris trading.