UPDATE 2-Canada vehicle sales outlook bright after October surge

Nov 1 (Reuters) - Canadian vehicle sales surged 7.8 percent last month in the industry's strongest October ever as consumers sought smaller, fuel-efficient passenger cars while also buying more luxury brands.

Ford Motor Co of Canada remained Canada's top-selling automaker in October with total sales increasing 7 percent.

Barring an economic shock, an annual record for Canadian sales should come within reach in the next few years, with the market possibly approaching 1.8 million units sometime during the current decade, independent automotive expert Dennis DesRosiers said.

Having recorded sales of 135,000 in October, Canada is on track to reach 1.7 million units sold in 2012. Sales reached more than 1.7 million vehicles only once before, in 2002.

``This incredibly positive market performance by the automotive sector should also continue as far out as we can see. Almost all metrics point to improvement for the next four (and possibly five or six) years,'' DesRosiers said in a note to clients.

Vehicle sales at Ford of Canada, a unit of Ford Motor Co , increased to 20,565 last month from 19,190 in October 2011, largely on the back of a nearly 17 percent jump in passenger car sales.

``The auto industry is a key engine driving the Canadian economy and it is showing strong, sustainable growth,'' said Dianne Craig, chief executive of Ford of Canada.

Cars, led by the Ford Focus, were by far the strongest segment as consumers snapped up smaller, fuel-efficient vehicles. Sales of trucks, including the popular F-150 line, also rose in October, by 4.5 percent.

Ford's vehicle sales so far this year are up 0.5 percent. Light trucks, traditionally the mainstay of Detroit automakers in Canada, remain by far the bigger seller with 179,712 sold between January and October, up 2.1 percent.

By comparison, Ford has sold 60,035 cars in the first 10 months of 2012, down 4 percent.

General Motors of Canada, a unit of General Motors Co. , was Canada's second-biggest seller in October even as its monthly sales dropped. GM's sales fell 4 percent in October to 18,651 despite a strong month for compact car sales, which were up 44 percent.

Sales at No.3 Chrysler Canada rose 3 percent in October, continuing their nearly three-year run of increases largely on the back of higher passenger car sales.

Chrysler Canada, a wholly owned unit of Fiat SpA's Chrysler Group LLC affiliate, said last month's increase to 17,049 units sold was its 35th consecutive month of year-over-year sales increases. That represents the longest sales streak in the company's history, it said in a statement.

Chrysler Canada's sales are up 6 percent year-to-date to 212,076 units.

Toyota Canada said it sold 17,101 vehicles in October, up 14.2 percent.

Among luxury brands, Porsche sales soared 117 percent and Audi's rose nearly 38 percent in October.