Carmakers in Europe have suffered their worst month in more than four years as the impact of the credit crunch begins to be felt by industry.

Most of the leading manufacturers endured sharp drops in sales as the market in Western Europe fell by 10.2 per cent in March.

Germany, Europe's biggest market, suffered a 14 per cent drop in new car sales compared with March last year. In Italy, the third-biggest market, sales plummeted by 18.8 per cent. New car sales in Spain plunged by 28.2 per cent, a fall exacerbated by the ending of tax incentives for scrapping older vehicles.

Only Europe's new member states reported strong growth in the new car market. Poland achieved a 19.5 per cent increase and Romania a 23.6 per cent rise. Their growth helped to mitigate the decline across the whole of Europe to 9.5 per cent.

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The British market held up, with a 0.5 per cent increase, but it is feared that it could suffer soon. March is usually a strong month for sales in Britain because buyers want the new registration plate that is issued then and in September.

Acea, the European carmakers' trade body, said that its figures showed that sales had been affected by the “context of economic uncertainty generated by the US financial crisis”. It also said that the market had been adversely affected by the early Easter, taking away two days of trading in March.

Roy Kishor, an automotive partner at the restructuring consultancy Kroll, said that the sales figures showed a substantial weakening in consumer demand. He said that the falls could have a significant impact on industry restructuring if it were to continue.

“This is a clear sign of a lack of consumer confidence,” Mr Kishor said. “Cars are going to start sliding off the consumer radar at some speed. They are being seen as luxuries rather than necessities.”

New cars are always likely to be among the first goods to be hit by a consumer slowdown because they are such a large item. In addition, usually customers have to take out loans to buy a new vehicle and they may feel less inclined to raise their borrowings in the present economic climate.

Carmakers had been hoping for some respite in the European market after a couple of years of sluggish sales. Several manufacturers have streamlined their operations over the past year to reduce capacity, with the loss of several thousand jobs.

Last month Toyota, the world's second-biggest carmaker, was dealt a blow when it emerged that sales of its own brand had fallen by 17.8 per cent. Lexus, the Japanese carmaker's luxury division, suffered a 22 per cent drop.

Sales by Volkswagen, Europe's biggest car manufacturer, fell 12.8 per cent, while Peugeot dropped 14 per cent. General Motors sales fell by 13 per cent and those of Ford, its American rival, by 12.3 per cent.

BMW was buoyed partly by the Mini, the iconic British marque that it owns, and its sales increased 2.2 per cent. Mini, which is made in Oxford, enjoyed a climb in sales of 21.2 per cent. Nissan was another manufacturer to enjoy success stimulated by one new car. Its sales jumped 36.7 per cent, reflecting the popularity of its new Qashqai crossover vehicle, which is made in Sunderland.

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