Home-grown Fiat, - which includes the Lancia and Alfa Romeo marques - sold 65,800 units, down 22.4 percent compared with January 2002. But its market share revived, fuelled by its sporty Alfa brand, whose sales rose about two percent.

Fiat's key Italian sales have slumped, tipping it into crisis, as customers were wooed by more attractive foreign models and as the company cut back on unprofitable sales channels like pre-registered cars or sales to rental firms.

In January, sales of foreign-brand cars dropped more or less across the board.

But PSA Peugeot Citroen marched ahead, with sales up 11 percent, fuelled by a 63.4 percent rise at Citroen, whose new bubble-shaped C3 has taken Italian car buyers by storm.

In December, Italian registrations rose 51.4 percent as consumers rushed to buy new cars before government incentives on eco-friendly vehicles ran out at the end of the year.

In mid-January, the government extended the incentive scheme until the end of March, which could buoy car sales despite Italian consumer confidence dragging at a near nine-year low.