Italian car sales will probably shrink 6.6% in 2005, industry body Promotor reportedly said on Thursday, signalling another tough year for automakers battling for ground in a weak European market.

Reuters noted that Italy, Europe's third-largest car market, has been buoyed this year by new launches from Fiat but the next releases from the Turin-based carmaker, an estate and a new version of the bestselling Punto, are not due until late 2005.

Promotor forecast Italians would buy about 2.1 million cars next year, while 2004 sales should total 2.25 million units, about the same as in 2003, the report said, noting that a withering Italian market is bad news for loss-mired Fiat, which is struggling to revive its car sales and relies on its home country for about 46% of them.

Its recovery has been hampered by a fierce battle between car companies to lure customers with incentives ranging from financing deals to free features on new cars - offers that Fiat can little afford as it strives to improve its profit margins, Reuters said.

Promotor reportedly said such incentives could wane next year.

"Car production costs have jumped recently due to strong rises in the cost of base materials. In this market they cannot pass on those costs to the customer so they may try to save money by reducing promotional deals," it said, according to Reuters.

The news agency noted that carmakers including Renault and GM Europe have predicted European car sales will be flat in 2005 after a rise of around 1.1% so far this year.