European new-car registrations appeared to turn a corner in June, posting the first increase in 14 months as government-led scrapping incentives fueled demand.

New-car registrations in Europe last month climbed 2.4% year-on-year to 1.46 million vehicles, the European Automobile Manufacturers Association said Wednesday. Registrations are an indicator of sales.

At least 10 European countries have implemented measures to spur demand for new cars since sales started to collapse in the last quarter of 2008. Those measures typically comprise price discounts on new, fuel-efficient vehicles to car owners who trade in old gas guzzlers.

Incentives on offer vary from country to country. Germany's plan is one of the most generous: it offers EUR2,500 in discounts. As a result, new-car registrations last month soared 40% year-on-year. But the plan is unlikely to be extended beyond 2009 and "will cease swelling car registrations by March, 2010," said Citigroup analyst John Lawson in a note.

Other nations aren't prepared to remove the industry support just yet. "France has already indicated it intends to provide further support at the end of its scheme - we expect this policy to be repeated elsewhere in Europe," Lawson added.

But analysts agree that the European market will slump once the incentives end. Lawson said that "a material decline in Europe's currently booming small-car sales in 2010 seems inevitable."

In the first half of the year, registrations in Europe, a key source of earnings for global automakers, dropped 11% from the same period last year to 7.43 million vehicles.

Registrations in Western Europe were up 4.6% at 1.38 million in June and fell 9.8% on the year in the January-to-June period to 6.98 million passenger cars.

Despite the scrapping incentives, General Motors Corp.'s (GMGMQ) European division in June posted an 8.4% fall in new-car registrations to 133,373 vehicles as a 16% rise at its Chevrolet brand failed to offset an 8.9% decline at Opel and Vauxhall.

GM currently is discussing offers to sell a majority stake in Opel and Vauxhall.

Fiat SpA (F.MI) posted an 11.7% rise year-on-year to 125,640 vehicle, making it the best-performing automaker in Europe, as the scrapping incentives fostered demand for its small cars.

New-car registrations at Volkswagen AG (VOW.XE), Europe's largest automaker by sales, were up 9.5% on the year in June at 312,302 vehicles, driven by its core VW brand.

Ford Motor Co.'s (F) European division saw registrations in June increase 2.2% on the year to 146,542 cars as the Ford brand's 5.4% rise more than offset a 15% decline at Swedish brand Volvo.

European new-car registrations for Toyota Motor Corp. (7203.TO) last month were down 4% on the year at 65,246 vehicles, with the Lexus premium brand posting a 30% slump to 1,696 cars.

French automakers Renault SA (RNO.FR) and PSA Peugeot-Citroen (UG.FR) both performed roughly in line with the overall market last month. Renault saw its new-car registrations rise 3.4% to 141,932 cars while Peugeot's registrations were up 4.4% at 191,638.

Renault's performance continued to benefit from strong demand at its Romanian low-frills Dacia brand, where European sales last month jumped 58% year-on-year to 27,144 cars. The Renault brand accounted for 114,788 cars in June, down 4.4% on the year.

The economic downturn continued to eat into luxury car sales in Europe last month as the region's scrapping incentives sparked demand mainly for small vehicles rather than larger, premium cars.

The world's two best-selling luxury automakers, BMW AG (BMW.XE) and Daimler AG (DAI), saw sales shrink 10.9% to 75,466 cars and 2.7% to 70,380 cars, respectively. Executives from both companies last week said that the trough of the segment's downturn had been reached.

Company Web site: www.acea.be

-By Christoph Rauwald, Dow Jones Newswires; +49 69 29 725 512; christoph.rauwald@dowjones.com