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European car sales end losing streak, respite may be brief

By Christiaan Hetzner and Rhys Jones

FRANKFURT/LONDON (Reuters) - Europe's ailing car market ended a streak of 18 straight months of falling sales, though a number of one-off factors suggested that a sustained recovery will be harder to achieve.

A pick-up in Germany and Spain in addition to continued robust demand in Britain delivered a 1.8 percent increase in new car registrations last month, to 1.08 million vehicles.

However, the figures published by automotive industry association ACEA on Friday were flattered by two extra sales days in many European markets after Easter holidays fell in March rather than April, with last year's weak April also helping the year-on-year comparison.

Demand for new cars in recession-hit Europe fell to a 17-year low last year as euro zone unemployment reached record highs, credit dried up and households focused on repaying debt.

Despite last month's upturn, the ACEA pointed out that it was still the third-lowest level of new registrations for the month of April.

"It's a bit like the 'dead cat bounce' because car sales have been so low for so long they may have reached their low point, but I'm wary about calling this a turning point because consumers in most of the euro zone remain under pressure," said Howard Archer, chief European economist at consultancy IHS.

"Germany is the best market to see future upticks because the fundamentals for consumers there, such as high employment and wage growth, are better than elsewhere."

VW UPLIFT

Monthly sales by Volkswagen , the world's third-largest carmaker, rose 7.2 percent in April, having grown at their slowest rate in more than three years a month earlier. GM's Opel brand, meanwhile, achieved a 2.1 percent gain.

Yet without a near-15 percent boom in Britain, which enjoyed its best April sales in five years, Europe's car market would have suffered a slight contraction last month.

For the first four months of 2013, volumes have declined 7 percent compared with the same period last year, with industry executives describing it as a challenging start to the year.

"We expect continued uncertainty through the summer season, especially as Germany heads towards September elections," said Allan Rushforth, European chief operating officer for Korea's Hyundai <005380.KS>.

French and Italian mass-market brands continued to pay a high price for their heavy reliance on car buyers in southern Europe.

"Smaller, cheap cars at the bottom of the market are selling well, as are high-end luxury vehicles. But the middle of the market, served by the likes of Fiat, Renault and PSA (Peugeot Citroen), continues to be very soft and weak," said Peter Wells, head of the centre for auto industry research at Cardiff University in Wales.

"That is a worrying divergence because the mass market drives the industry's sales and it's hard to know what the natural size of the European car market is now."

Both of PSA's brands surrendered market share after Peugeot sales fell 7.5 percent and Citroen dropped nearly 13 percent. Renault managed to escape with only a 1.3 percent drop last month.

Fiat's eponymous brand notched a 4 percent drop, while sales for its sporty Alfa Romeo marque collapsed by a third and now counts fewer new car customers in its core European market through April than Japanese import Mitsubishi <7211.T>.

(Editing by Edwina Gibbs and David Goodman)

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