* French Sept car sales down 18 pct
* Spain sales down 37 pct, hit by tax increase, scrappage
* Italy car sales due later Monday, German figures Tuesday
(Adds Spanish registrations, details, background)
PARIS, Oct 1 (Reuters) - Car sales dropped further in austerity-hit France and Spain last month, and France's CCFA auto industry association cut its full-year market forecast, highlighting the pain for automakers that have warned there is no recovery in sight.
French September car registrations dropped 18 percent year-on-year, while Spain's plunged 37 percent, the countries' main industry associations said on Monday. Italian market figures were due later in the day.
The Spanish plunge was accentuated by a Sept. 1 sales-tax increase, which had brought forward some sales to August.
Would-be buyers also held out for renewed scrappage incentives introduced on Monday.
The September decline was nonetheless a "disappointing result", the ANFAC association said.
Scrapping incentives offer car buyers a bonus for trading in old cars for a new model. Previous schemes in countries such as France, Germany and Italy helped Europe's car market to withstand the last economic slump in 2008-2009.
European car executives gathered at the Paris auto show last week warned that a rebound may be years rather than months away.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on Europe car registrations by country: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> CUTTING FORECASTS
Announcing the French market's 11th straight monthly decline on Monday, the CCFA slashed its 2012 outlook to predict a 12 percent slump, instead of the 10 percent contraction previously forecast.
Renault had cut its own market forecasts on Sept. 26 to predict declines of 13 percent in France and 7-8 percent in Europe.
The French brand suffered some of last month's biggest declines, with sales dropping 36 percent at home and 51 percent in Spain. Ford sales also lost ground in both markets, tumbling 32 percent in France and 40 percent in Spain.
For the first nine months, the French car market recorded a 14 percent decline, and Spain shrank 11 percent.
While PSA Peugeot Citroen's small cars suffered in the lull ahead of renewed Spanish incentives, the twin brands fared better at home.
Buoyed by accelerating sales of its new 208 subcompact, Peugeot's French registrations fell just 1 percent in September, resisting the market slump. Citroen dropped 10 percent.
Volkswagen , Europe's biggest automaker, fell in line with the French market and lost ground for its core VW brand in Spain, where sales fell 44 percent.
Fiat dropped 34 percent in France but just 13 percent in Spain, limiting the damage with an 82 percent gain in registrations of its Panda mini.
(Reporting by James Regan, Laurence Frost and Robert Hetz; Editing by Helen Massy-Beresford)
Keywords: FRANCE AUTOS/