MILAN -- Italian new car sales fell sharply in May and industry groups expect a "serious worsening" in the months ahead, but ailing Fiat's market share rose for the third straight month, government data showed on Thursday.
Industry bodies blamed a 13.5-percent drop in May sales on the expiry of incentives on eco-friendly cars and said worse was to come in the next few months if the tax breaks were not renewed.
Total sales fell to 179,600 units from 207,677 in May 2002.
Analysts said the shrinking market in April and May had wiped out the impact of the incentives that tugged car sales higher in February and March. Sales this year are flat on 2002, when they were in freefall.
The government introduced tax breaks encouraging people to swap old polluting cars for new environmentally friendly models in the middle of last year, mainly to help struggling Italian carmaker Fiat, one of the country's biggest employers. The incentives expired at the end of March.
"With the incentives gone, the market has gone back to its normal course of low sales that you typically see in times of economic slowdown," said industry group Centro Studi Promotor.
Italian consumer confidence tumbled to a more than nine-year low in May, indicating shoppers will likely postpone big-ticket purchases like cars.
The Italian government is looking at introducing incentives to boost consumer spending but while Industry Minister Antonio Marzano has said he is in favour of re-starting tax breaks on cars, he has also hinted other ministers are against it.
According to Centro Studi Promotor, 87 percent of dealers felt that very few people had visited their showrooms in May with most of those reporting a drop in orders. Industry body Anfia said orders had fallen 14.4 percent in May.
However, there was a glimmer of hope for Fiat, which has been forced into a root-and-branch restructuring due to a slump in sales.
Fiat's share of its key home market was 29.3 percent in May, up slightly from 28.8 percent in April and safely higher than the historic low of 27.6 percent it hit in February. Its Punto, Seicento and Stilo models were the top sellers of the month.
But its unit sales still continue to fall on an annual basis, with May's total sales 17.2 percent lower than in May 2002, when sales fell 16.8 percent on the previous year.