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UPDATE 1-Italy car sales seen surging in March-research

(Adds UNRAE, Fiat comments)

By Gianni Montani

TURIN, March 25 (Reuters) - Italian car sales are expected to surge in March as buyers rush to the showrooms in the final days of an incentive programme, industry groups said on Tuesday.

In January, the government extended incentives until the end of March for people to swap older cars for newer models that pollute less, a move widely seen as designed to help Fiat boost its sagging car sales on the key domestic market.

Auto market research group Centro Studi Promotor (CSP) said March sales should be between 250,000 and 280,000, showing strong growth from the 205,000 figure for March 2002.

Fellow industry body UNRAE which represents foreign car makers in Italy said it expected car sales to rise to 250,000-260,000 units in March.

"We expect a double-digit (year-on-year) growth as a logical consequence of incentives' closing," UNRAE General Secretary Gianni Filipponi told Reuters.

March car sales data is due to be released on April 3. In February, car sales rose more than eight percent to 214,100. Fiat, which is particularly dependent on its local market, saw its share fall to a record low of 27.58 percent.

The actual level of March deliveries overall will depend on the number of cars available at dealerships, but in any case it will be a record for the month, CSP said.

Both industry bodies expected sales to show a sharp drop-off in April unless the incentives were extended, with UNRAE adding that war in Iraq would chill consumer sentiment.

"After nine months of incentives and an economic situation that is progressively deteriorating, the Italian (auto) market could tumble, with strong repercussions for the entire economy," CSP said, advocating an extension of tax breaks.

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Fiat has struggled to capitalise on the breaks as many buyers have shunned its line-up of ageing models for foreign rivals' newer products.

Fiat's market share also came under pressure in February because of flood damage at a key factory which cut car production by about 40,000 units.

Gianni Coda, head of the Fiat and Lancia brands, said on Tuesday the carmaker was still feeling the negative effects of the flood and had been unable to match the domestic car market rally in March.

Speaking at a presentation at Fiat's Melfi factory in Italy's south, Coda said sales had started to pick up compared with previous months but the car maker was constrained by limited dealers' stocks available for immediate delivery, his spokesman told Reuters.

He declined to give a forecast for March sales.

"It is too early to give precise data. Thanks to cooperation with dealers we are trying to limit a loss of deliveries and new car registrations," Coda's spokesman quoted him as saying.

By 1630 GMT, Fiat shares were up 3.1 percent at 5.97 euros, faring better than a 2.2 percent rise in the DJ Stoxx index for European automakers . (Additional reporting by Stefano Rebaudo in Milan)