Europe's car market decline gathered pace in December, led by a sales slump at regional No.2 automaker PSA Peugeot Citroen
, as worried consumers steered clear of big purchases, industry data showed on Tuesday.

Peugeot's domestic rival Renault also tumbled, along with Fiat and General Motors , while German rivals resisted, with Volkswagen gaining ground and luxury brands lifted by resilient premium demand.

Total European car registrations dropped 5.8 percent last month, following declines of 1.4 percent in September and 3 percent in November, the Brussels-based Association of European Carmakers said. Registrations ended the year 1.4 percent lower at 13.6 million.

Consumers are loath to engage in big-ticket expenditure as purchasing power comes under pressure, said Alexander Law, head of economics consultancy Xerfi Global in Paris.

The downgrade of nine European nations' debt by Standard & Poor's last week will lead to higher interest rates on consumer credit including car loans, the firm predicts.

That will weigh heavily on the auto market, Law said. This year is going to be very tough.

December's auto market slide was accompanied by worsening euro zone consumer confidence, according to European Commission data. Germany, the region's biggest economy, was the only major auto market to post growth for the month.

Slowing car registrations also coincided with falling euro zone retail sales in the last months of 2011 that raised the prospect of a second recession in three years. Retail sales fell by a worse than expected 0.8 percent in November from October.

Paris-based Peugeot's sales dropped 19 percent to 112,802 cars last month, weighed down by a 23 percent plunge for the Peugeot brand, while Citroen declined a more modest 13 percent.

Peugeot lost one percentage point of market share last year as its stock underperformed all 14 other members of the STOXX Europe 600 autos & parts index <.SXAP>, plunging 56 percent in the last 12 months.

Earlier this month the company hired a top McKinsey consultant as strategy director, a week after the departure of its second-ranking executive amid sagging sales and profitability.

GERMANS BUCK TREND

Bucking the declining market trend, Volkswagen consolidated recent advances in December. Sales rose 9 percent in December for a 7.8 percent full-year gain that lifted VW's market share by 2 percentage points to 23.3 percent in 2011.

Sales by Renault, General Motors and Fiat fell 14 percent, 15 percent and 16 percent, respectively, on a shift away from smaller cars, collapsing southern European demand and the effects of ageing model line-ups.

European carmakers are expanding overseas to reduce dependence on their stagnating home markets.

Renault increased the share of deliveries outside Europe to 43 percent in 2011 from 37 percent a year earlier, the company said on Tuesday.

Renault's global sales increased 3.6 percent to 2.72 million vehicles last year and will grow another 3-4 percent in 2012, Renault sales chief Jerome Stoll said, adding that Europe should improve towards the end of the year after a tough first half.

At the Detroit Auto Show last week, industry executives predicted a steady recovery in U.S. car demand but were far less bullish about the European market, seen contracting about 5 percent for a fifth straight annual decline.

What we're seeing is a recession coming in Europe, Renault-Nissan Chief Executive Carlos Ghosn said in Detroit. ID:nL6E8CA66M]

Premium car makers have so far largely escaped the European sales slump. Daimler's Mercedes Benz posted a 10 percent December sales gain to keep the group's 2011 sales in positive territory.

BMW, the world's biggest luxury car maker, saw registrations drop 3 percent last month as some buyers held back for an imminent update to the core 3 Series model. Full-year sales rose 7.6 percent.

In another relatively upbeat sign for the Germans, the country's ZEW index of analyst and investor sentiment posted its biggest ever gain on Tuesday, rising to -21.6 in January from -53.8 percent last month.

On a less positive note, Volkswagen on Monday extended a safety recall of diesel models to cover 300,000 vehicles at risk of fuel leaks, almost double the number affected by the original notice in October.

BMW also recalled some 236,000 vehicles from its Mini brand because of circuit board defects that could cause fires.

(Editing by James Regan and Hans-Juergen Peters)