In October, new car registrations dropped by 7.1% year-on-year to 1.13 million vehicles in the European Union, Britain and the countries of the European Free Trade Association (EFTA), figures from the European Automobile Manufacturers' Association (ACEA) showed.

Europe's five largest markets all posted negative results. Sales in Spain and France fell by 21% and 9.5% respectively, while Italy, Germany and the United Kingdom registered more moderate drops of 0.2%, 3.6% and 1.6% respectively.

Volkswagen Group's and PSA sales fell by 7.5% and 5.3% in October respectively, while Renault saw a slight rise of 0.5%.

Luxury automakers also posted losses in October with BMW's sales falling 11.8% and rival Daimler's reporting a 7.2% drop.

European governments have been working to save the auto sector which has been badly hit by the collapse in demand caused by the coronavirus crisis.

Germany on Tuesday said it would earmark 3 billion euros ($3.6 billion) to support the development and production of climate-friendly cars.

France is extending aid measures set up to help people buy new cars, while the Italian government is setting aside hundreds of millions of euros to support the sector.

(Reporting by Riham Alkousaa; Editing by Douglas Busvine)