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In this Sept. 7, 2012 file photo, a Peugeot, left, and Citroen cars are parked in Paris.Jacques Brinon/The Associated Press

Ford, PSA Peugeot Citroen and Toyota led European car sales to a new low in January, kicking off 2013 with an 8.5 per cent decline, the Association of European Auto makers said on Tuesday.

Registrations fell to 918,280 new cars, the Brussels-based industry body said in a statement, the slowest January since its records began in 1990, as austerity measures and unemployment hit consumer spending.

Ford, which is cutting back its European production capacity with three plant closures to stem regional losses, recorded a 26 per cent sales plunge to 61,544 cars. Peugeot and Toyota posted the next biggest declines among major auto makers, dropping 16 per cent each.

The slide "confirms a weak start to 2013", Credit Suisse analysts said in a note. "Hopes of an earnings and cash recovery in the second half are misplaced."

After falling to a 17-year low in 2012, European car demand is expected to contract further this year, squeezing mass-market brands still harder between excess capacity and cut-throat pricing. Most car makers see the regional market shrinking between 3 and 5 per cent in 2013.

Tentative hints of a broader euro zone economic upturn have yet to percolate to the car industry.

Germany in particular is weighing on the outlook. After resisting much of last year's slump, Europe's biggest car market is in sharp decline, extended by an 8.6 per cent drop in January.

Despite weak demand at home, Volkswagen increased its share of European sales. Its registrations fell 5.5 per cent, a more modest decline than the market's, as the premium Audi nameplate fell just 2.1 per cent.

Its two German luxury rivals proved even more resilient, with BMW brand sales rising 9.4 per cent and Daimler's Mercedes-Benz gaining 4.7 per cent.

Sales by Renault's low-cost Dacia brand rose 8.5 per cent, limiting the group's overall decline to 6.1 per cent.

The troubled Renault brand saw domestic orders rebound 12 per cent last month, according to a dealership survey by La Lettre VN.

Overall French orders fell 3.5 per cent, the trade publication said, in a sign that registrations may stabilize in the coming months after a 15 per cent January slide.

South Korea's Kia also fared well, with registrations surging 7.7 per cent, while affiliate Hyundai's sales fell just 2.2 per cent.

Italy's Fiat posted a 12.4-per-cent sales decline, despite a more modest 4 per cent drop for the Italian car maker's namesake brand.

The upscale Alfa Romeo marque, upon which Fiat chief Sergio Marchionne is pinning the group's recovery strategy, saw its European sales collapse 37 per cent.