Car registrations slow in Europe, fall in UK in October

(Adds detail, analyst comment)

LONDON/PARIS, Nov 5 (Reuters) - British new car registrations suffered their first annual decline for 3-1/2 years in October, with diesel registrations down over 2 percent, while scandal-hit Volkswagen (Other OTC: VLKAF - news) lost ground as market growth slowed across Western Europe.

The Society of Motor Manufacturers and Traders (SMMT) said on Thursday that new car registrations in Britain fell by a yearly 1.1 percent last month to 177,664 units, the first annual fall since February 2012.

Diesel car registrations were 2.1 percent lower on the year, compared with a 0.9 percent drop for petrol cars.

Across Western Europe, registrations rose to 1.06 million cars last month from 1.03 million the previous October, based on published national data and smaller market estimates compiled by LMC Automotive. That cut overall market growth to 2.7 percent.

In the first sign that Volkswagen's emissions cheating scandal was beginning to hit sales, VW Group registrations were down 2.7 percent in the five biggest markets -- Germany, the United Kingdom, France, Italy and Spain.

That compared with an overall rise of 2 percent in industry registrations in those markets, according to the leading automotive consulting firm.

"There is clearly a sign of some impact there," LMC analyst Emiliano Lewis said.

Because car deliveries typically occur several weeks after purchase decisions, however, the full sales repercussions of VW's Sept. 18 admission of diesel test-rigging will become more apparent in November registrations.

The October numbers equated to a seasonally adjusted selling rate of 13.05 million cars per year, LMC said, a 2 percent decline from September's 13.31 million rate - but still almost 1 million cars above the 2014 total.

In Britain, new VW registrations were down 9.8 percent year-on-year in October, although that was in line with other major brands such as Ford.

British car production and registrations of new cars have been strong over the past three years, helped by a strong economic recovery and low interest rates.

The SMMT said the levelling off in demand was expected and that the sector is still in a strong position.

"It (Other OTC: ITGL - news) 's nothing to really worry us, to be honest. The seasonably adjusted rate still looks healthy," said Dominic O'Brien, analyst at BNP Exane Paribas, adding that the dip followed an unusually strong 43-month upturn.

He said it was too early to draw firm conclusions about VW sales from a single month's numbers, as registrations of cars ordered earlier in the year may still be filtering through.

"The microscope will be on every number about VW, but we have to separate it from the monthly volatility."

Registrations of Volkswagen brands SEAT and Skoda also declined on the year, but rose for its luxury Audi (LSE: 0FG8.L - news) marque.

So far 2,274,500 cars have been registered in Britain this year, up 6.4 percent compared with the same point in 2014, the best year-to-date performance on record, the SMMT said.

"The economic fundamentals still look largely healthy for the motor industry which will hopefully allow car sales to hold up at an elevated level over the coming months," IHS Global Insight economist Howard Archer said.

(Reporting by Andy Bruce and Laurence Frost; Editing by Catherine Evans)