Auto sales in the United States and Europe slumped in August, reflecting the end of government subsidies that had propped up demand and underscoring uncertainty about the strength of the U.S. economic recovery.

The monthly auto sales figures reflect one of the first and broadest-based snapshots of consumer demand.

Initial sales figures from major automakers pointed toward a U.S. auto sales rate near 11.5 million vehicles on an annual basis, analysts and industry forecasters said.

That would be up from the 11.3 million sales rate of the second quarter but down sharply from the 14 million-plus in August 2009 when the U.S. government's cash for clunkers sales incentives touched off a short-lived boom.

General Motors Co , which is readying a stock offering intended to reduce the U.S. government's majority stake in the automaker, posted a 25 percent sales drop for August.

Ford Motor Co reported an 11 percent sales decline, while Nissan Motor Co <7201.T> posted a sales drop of 27 percent.

Chrysler, now operating under the control of Fiat SpA , posted a 7 percent sales gain. The No. 3 U.S. automaker has relied more heavily than its rivals on less-profitable fleet operators, led by car rental agencies.

Almost 40 percent of Chrysler's U.S. sales through July were to fleet customers, according to industry estimates.

Under Chief Executive Sergio Marchionne, the automaker has declined to disclose that figure, breaking with its larger U.S. rivals GM and Ford.

The U.S. market has failed to deliver the kind of accelerating recovery that most automakers projected heading in to 2010 but major automakers said they saw no sign of a double-dip recession.

Based on what I'm seeing in the industry, I would be very surprised if it happened, said Al Castignetti, head of Nissan brand sales in the United States, who said the Japanese automaker was surprised by the volume of car shoppers at dealerships at the end of August.

The risk of a reversal in the U.S. economic recovery is a potential threat to GM's plans for an initial public offering expected to reduce the U.S. Treasury's nearly 61 percent ownership stake.

GM sales chief Don Johnson said the automaker expected that American consumers would remain cautious given a weak job market but that the industry would continue to recover from the 10.4 million vehicle sales of 2009.

We still see a low risk of any double-dip recession unless there's some unforeseen shock to the system, Johnson said on a conference call.


French, Spanish and Italian car sales fell, as scrapping incentives are fading or have run out in those markets.

In China, the world's biggest auto market, passenger car sales jumped almost 60 percent for the month, a sharp improvement from the sales rise seen in July. (For a graphic on August car sales in China, Japan, France and Spain, see: )

But runaway growth has been tapering in the world's No. 2 economy since the second quarter as the government tries to stop the economy from overheating, and executives are cautious about the outlook for the rest of the year.

China's car sales rose to 977,300 in August, according to the government-affiliated China Automotive Technology & Research Center.

Sales at India's top three local automakers -- Maruti Suzuki , Mahindra & Mahindra and Tata Motors -- rose between a quarter and a third.

India is one of the fastest growing automobile markets in the world, expanding at 35 percent on average in the first four months of the current fiscal year, data from the Society of Indian Automobile Manufacturers showed.

Auto sales in Japan rose sharply in August, led by Toyota Motor <7203.T>, Honda Motor <7267.T> and others, as consumers bought before government subsidies expire at end-September.

Japanese automakers are bracing for a hard landing after subsidies disappear. The government has allocated $6.9 billion for the initiative and that pool looks set to run dry in less than two weeks at the current pace of registration.

Sales of new cars, trucks and buses in Japan soared 46.7 percent to 290,789 vehicles, marking the third-biggest monthly rise on record, the Japan Automobile Dealers Association said.

Sales in the U.S. market -- the second-largest behind China in volume but the most lucrative by revenue -- were expected to be just above 1 million vehicles in August.

(Additional reporting by Chang-Ran Kim in TOKYO, Miyoung Kim and Hyunjoo Jin in SEOUL, Sonya Dowsett in MADRID, Phil Blenkinsop in BRUSSELS, Antonella Ciancio in MILAN, Gianni Montani in TURIN and Bharghavi Nagaraju in BANGALORE; Editing by Matthew Lewis and Erica Billingham)