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* European car sales record further gain in October
* Toyota, Renault lead advance among mass automakers
* Daimler gains ground against BMW, Audi
By Laurence Frost and Jennifer Clark
PARIS/MILAN, Nov 19 (Reuters) - European car sales rose 4.6 percent in October, according to industry data published on Tuesday, as a broad-based recovery took root in the region's main auto markets.
Toyota and Renault led the advance among mass manufacturers, with Daimler gaining ground on premium rivals as total registrations rose to 1.04 million cars, the Association of European Automakers said.
Despite what may become a sustained upturn in demand, the European auto market is set to post a sixth consecutive full-year decline in 2013 to its lowest level in two decades. Registrations were down 3.1 percent for January-October across the European Union and EFTA trading bloc.
But the year-on-year advance in October - a month after sales turned positive with a 5.5 percent increase - may embolden car executives planning for a return to full-year growth in 2014, albeit a low single-digit rate.
"The market could pick up more quickly than we had anticipated," said Jonathon Poskitt, head of European forecasting for LMC Automotive.
Ford, PSA Peugeot Citroen and General Motors have all reacted to the slump by closing plants.
But with factories still running at an average 65 percent of maximum output, Poskitt cautioned, "overcapacity remains an issue".
Carmakers that have kept up investment to launch successful new models in recent months are already gaining market share in the beginnings of a recovery.
Renault's group sales jumped 14 percent on strong demand for its Captur mini-SUV and revamps of the no-frills Dacia brand's Logan and Sandero models.
Toyota surged 16.5 percent to 49,097 cars last month, helped by models like the Auris compact.
European market leader Volkswagen and General Motors also outpaced the broader expansion with respective gains of 5.7 percent and 6.2 percent.
Within the VW group total, sales at the premium Audi division shrank 0.5 percent, while rival BMW rose just 0.3 percent. Both trailed an 8.5 percent gain for Daimler's Mercedes-Benz division on the popularity of new models like the CLA compact.
October's registrations increase was helped by positive contributions in all major European markets - including a 34 percent surge in Spain - with the exception of Italy.
"Spain's increase is very positive," said Peter Fuss, a senior automotive specialist with Ernst & Young. "It's a sign that confidence in the euro zone is coming back."
The Italian market's further 5.6 percent decline compounded the punishment for Fiat, which has slashed investment to ride out the crisis and pursue a buyout of 58.5 percent-owned Chrysler.
The group's ageing model lineup suffered a 7.3 percent drop in European sales, led by declines of 12.2 percent at Lancia and 34 percent at the Alfa Romeo brand, still awaiting a long-promised revival plan.
While IHS Automotive forecasters expect a return to low Italian growth next year, Fiat-Chrysler's regional boss Alfredo Altavilla said this month he saw no recovery signs yet.
Despite a 2.6 percent French market expansion and new model launches, Peugeot posted a further 0.7 percent regional sales decline - a worrying sign for the Paris-based carmaker as it struggles to halt losses threatening its independent survival.
That eroded the Peugeot and Citroen brands' combined European market share to 11 percent for the first 10 months of 2013 from 11.8 percent a year earlier.