US auto sales fell 37 percent in March, a smaller-than-expected drop that encouraged hope that the world's largest car market is nearing a bottom after a freefall that has pulled the industry into a deepening crisis.

General Motors Corp, which has until June to complete a new restructuring under federal oversight that could push it into bankruptcy, said its sales fell 45 percent, the largest decline of any of the major automakers.

Industry-wide sales fell for the 17th consecutive month but were up from February with the help of record discounts and higher sales to fleet operators such as government agencies.

Auto sales typically account for as much as a fifth of overall US retail sales and industry executives held out hope that the market would hit bottom over the next quarter or so.

"I think we're seeing maybe the first signs of a brightening in the outlook for the auto industry in March," GM chief sales analyst Mike DiGiovanni said on a conference call.

Sales for Ford Motor Co, the only US automaker operating without government aid, dropped 41 percent.

Major Japanese automakers and Chrysler posted sales declines ranging between 36 and 39 percent.

Overall sales were almost 9.9 million vehicles on the annualised rate tracked by analysts, down sharply from the average near 16 million over the past decade.

"We believe we may be at or near the trough of the industry's year-to-year comparisons but do not see an uptick in industry demand before (the fourth quarter) at the earliest," said Efraim Levy, an equity analyst with Standard & Poor's.

Shares in Toyota Motor Corp, Honda Motor Co, Nissan Motor Co and other Japanese automakers jumped as investors reacted to the better-than-expected results.

"Share prices are looking for a new direction, so they reacted positively to the US sales results," UBS Securities analyst Tatsuo Yoshida said, although he said the year-on-year decline was still staggering and the annualised sales rate extremely low.

Toyota rose 5.8 percent, Honda gained 8.9 percent and Nissan put on 9.6 percent in Thursday morning trade in Tokyo.

Discounts in the United States hit a record in March, averaging $3,169 per vehicle based on the value of offers including rebates ando block GM from extending $150 million to Delphi.

Elsewhere, car markets in Europe showed tentative signs of recovery, helped in part by government tax incentives encouraging cash-strapped consumers to ditch old cars for new and more fuel-efficient models.

Sales rose strongly in France and Italy and the rate of decline slowed in Spain. In Germany, officials said more than 860,000 car owners had signed up for a new-for-old "scrappage" bonus.

The success of that programme has become the model for a bill under consideration in the US Congress that won backing this week from President Barack Obama.

In Japan, auto sales slumped 25.3 percent in March from a year earlier. South Korea's five automakers posted an 18.8 percent drop in sales in March, with exports down 19.9 percent. Hyundai's registrations fell 9.8 percent. - Reuters