By Laurence Frost
PARIS, April 17 (Reuters) - European car sales fell for a sixth straight month in March, led by Fiat, Renault and Peugeot, as the deepening slump in France and Italy outweighed a fragile recovery in Germany and Britain.
Registrations dropped 6.6 percent to 1.5 million cars, their lowest March level since 1998, the Brussels-based Association of European Automakers (ACEA) said in a statement on Tuesday. First-quarter sales tumbled 7.3 percent.
The year-on-year slide accelerated in much of southern Europe compared with the previous month - to 27 percent in Italy, 23 percent in France and 4.5 percent in Spain.
Punished by the ongoing Mediterranean slump, deliveries by Italy's Fiat plunged 26 percent to 81,469 cars, followed by French automakers Renault and PSA Peugeot Citroen, with declines close to 20 percent.
"The mass market is so much more exposed to weaker southern European countries, whereas luxury is proving more resilient," London-based Barclays Capital analyst Kristina Church said.
General Motors' European sales fell 10 percent, Ford's 7.6 percent and Toyota's 2.1 percent.
The market decline is likely to intensify pressure on first-quarter earnings as car makers struggle to clear stocks of unsold vehicles, said Peter Fuss, a global automotive specialist with Ernst & Young.
The firm sees European auto deliveries falling 5 percent this year to below their low point of 2009.
"We expect manufacturers to continue adopting aggressive pricing strategies and incentives," Fuss said. Automakers need to "keep inventories and production in check to avoid funding issues similar to the 2008-9 recession".
The German and British auto markets nonetheless turned positive in March, with respective gains of 3.4 percent and 1.8 percent. The upturn helped Germany's Volkswagen, Europe's biggest automaker, to buck the overall market contraction with a 1.7 percent advance to 352,455 cars.
VW's first-quarter market share gained 1.8 percentage point to 23.7 percent, compared with declines of 1.4 point for regional No.2 Peugeot and 1.7 point for Renault.
The VW group March performance was helped by a 7 percent sales gain for its Audi brand, amid resurgent demand for luxury cars.
BMW, the world's largest premium automaker, recorded 93,313 European registrations, up 3.2 percent, while deliveries by Daimler's Mercedes unit surged 6.8 percent.
"We're seeing a two-tier Europe at the moment," Barclays' Church said. "As long as Germany and the UK can stay firm it's great news for luxury."
South Korea's Hyundai and affiliate Kia Motors continued to win business from traditional European automakers, lifting their combined market share to 5.7 percent last month from 4.6 percent a year earlier, with a 13 percent sales gain.