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* Demand in European Union up for the 5th consecutive month
* Growth in all major markets, and former crisis-hit ones
* Cheaper brands see market share gains
By Edward Taylor
FRANKFURT, Feb 18 (Reuters) - European car sales rose 5.2 percent in January, with increases in previously crisis-hit countries such as Greece, Ireland, Italy and Portugal suggesting a recovery is gaining strength.
The Association of European Carmakers (ACEA) said on Tuesday car sales in the European Union and the European Free Trade Association trading bloc totalled 967,778 vehicles last month.
Europe's car industry endured a six year slump, with sales falling to their lowest level for around 20 years as austerity-hit consumers cut back on expensive purchases, but has recently returned to growth.
"The signs of a recovery of the European market, which first became apparent in the second half of last year, continued in January. None of the large markets were down, and some of the smaller markets have picked up," said Eric Heymann, an analyst at Deutsche Bank.
The number of cars sold under the Volkswagen, Peugeot and Renault brands - the three largest in Europe by market share - rose 7.6 percent, 8.8 percent and 3.8 percent respectively, ACEA said.
Manufacturers were cautiously optimistic.
"Today's figures show that we're on the road to recovery," said Allan Rushforth, chief operating officer at Hyundai Motor Europe.
"The question is how much of that recovery is organic and how much is the result of actions taken by governments and carmakers," he added, referring to subsidy schemes and big discounts which have helped to revive car purchases.
Hyundai, which saw European sales fall 5.5 percent in January, said it would not pursue market share gains at any cost.
ACEA said car sales in the European Union had now risen for five straight months.
All the major European markets reported a rise, with Britain and Spain both up 7.6 percent and Germany up 7.2 percent, while Italy and France grew 3.2 percent and 0.5 percent respectively.
Only Netherlands among the larger markets was down, by 7.1 percent.
Sales in some of the smaller countries most affected by Europe's debt crisis saw some of the biggest increases, with sales up 33 percent in Ireland, 32 percent in Portugal and 15 percent in Greece.
Value brands and upmarket vehicles appeared to be the main beneficiaries of growth.
Sales at Renault Group jumped 13 percent, boosted mainly by a 38 percent surge in registrations of its no-frills Dacia brand.
Germany's Volkswagen Group, Europe's No. 1 by volume, which also owns Seat, Bentley and Lamborghini, posted an 8.2 percent rise, helped by a 10 percent increase in registrations at its value brand Skoda and an 8.5 percent gain at premium brand Audi.
BMW and Mercedes-Benz both recorded gains of just over 1 percent.
Toyota branded vehicles were up 15 percent while rival General Motors saw sales of its Opel and Vauxhall branded vehicles slide 7.8 percent, even as sales of Chevrolet vehicles rose 8.9 percent. Ford saw new passenger car registrations rise 8.8 percent during the period.