The French government is to continue its consumer incentive scheme to trade in old cars for new into 2011, an official said yesterday.

Economy minister Christine Lagarde said authorities want to gradually phase out the scheme.

"We are looking at two fiscal years for the moment, 2010, 2011 in addition to 2009," she told Reuters. "As successful as it has been...we need to be successful in pulling out...We are looking at two fiscal years to make it truly gradual."

New car sales in France jumped 3.1% in July compared with the same month a year ago on the back of the government backed incentive.

Car registrations reached 188,635 last month according to a French trade association, although total sales of light vehicles, which include commercial vans as well as cars, dropped 1.3% to 218,790 registrations.

Car sales ended a five month slump in March as the incentives combined with environmental bonus - and penalty - payments spurred demand for smaller, more fuel efficient cars although sales of luxury vehicles slowed.