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After record UK car sales, Europe to look south for more growth
* Western European car sales rose 9 pct in 2015 - LMC
* UK sales hit record; Italy and Spain grew strongly
* UK sales seen flat this year, with southern Europe up (Adds European data, quotes and forecasts)
By Costas Pitas
LONDON, Jan 7 (Reuters) - Europe's second biggest auto market Britain recorded its highest ever car sales in 2015, but the continent will likely need a continued recovery in southern European markets to drive growth this year, industry experts said on Thursday.
Western European new car registrations rose 9 percent to 13.2 million in 2015 based on national data and estimates compiled by LMC Automotive, with cheap credit boosting British sales.
However, Britain's Society of Motor Manufacturers and Traders forecast 2016 registrations would be roughly flat, and analysts predicted western European growth would need to come largely from further recovery in Mediterranean countries.
"We're going for 5 percent growth (in western Europe in 2016) and that's largely focused in southern Europe and partly in France," Exane BNP Paribas analyst Dominic O'Brien told Reuters, citing Italy and Spain as key growth areas.
The two countries recorded the biggest rises among the five major western European markets last year, with Italian sales up 16 percent and Spanish sales up 21 percent, according to LMC.
Spain's economy has shown signs of a recovery over recent months, though an inconclusive election result in December could jeopardise growth. Italy's economy also improved in 2015.
O'Brien said French carmaker Renault (Xetra: 893113 - news) and Germany's Daimler (Xetra: 710000 - news) were likely to be among the best performers this year.
"You've still got quite good sales momentum at (Daimler-owned) Mercedes ... and Renault are launching new cars in new segments at the moment," he said, pointing to the new Megane and Scenic models due this year.
In Britain, cheap credit, rising consumer confidence, falling unemployment and low inflation all helped to bolster sales, which rose 6.3 percent to 2.63 million in 2015, beating a previous record set in 2003.
But most economists polled by Reuters expect the Bank of England to raise interest rates in the second quarter of this year for the first time since before the financial crisis, making it more costly to meet repayments on car purchases.
Sales of Volkswagen (Other OTC: VLKAF - news) -branded cars in Britain, which fell 10 percent in October and 20 percent November in the aftermath of firm's diesel emissions test cheating scandal, recovered somewhat in December, recording a fall of 0.4 percent.
VW brand Seat performed the worst of the German carmaker's major brands last month, falling 46 percent, ending the year down 11 percent.
Evercore ISI analyst Arndt Ellinghorst said there was less loyalty to the formerly Spanish brand, forecasting Seat's western European sales would be flat or fall next year.
However, he predicted VW group sales would rise 2 percent, with the namesake VW brand seeing some difficulties at the start of the year but ending it flat due to strong customer loyalty.
"The VW brand behaves amazingly strongly but ... there are still going to be some hiccups at the beginning of the year because you will still see the cancelling of orders from fleet for instance will only impact registrations early this year." (Editing by Jeremy Gaunt and Mark Potter)
