(Reuters) -New car sales in the European Union fell 18.3% in August to their lowest in three years, dragged down by double-digit losses in major markets Germany, France and Italy and sliding electric vehicle (EV) sales, auto industry body data showed on Thursday.

The data showed the fourth consecutive monthly drop in EV sales, prompting the European Automobile Manufacturers' Association (ACEA) to demand "urgent action" to prevent further decline.

It said the industry needed "EU institutions to come forward with urgent relief measures before new CO2 targets for cars and vans come into effect in 2025".

Sales of fully electric cars slumped 43.9% in August, as the bloc's biggest EV markets Germany and France recorded drops of 68.8% and 33.1% respectively, ACEA said.

Registrations of plug-in electric cars meanwhile fell 22.3% in the 27-member bloc.

Sales at Europe's three largest carmakers Volkswagen, Stellantis and Renault fell from a year earlier, by 14.8%, 29.5% and 13.9%, respectively.

Car sales in Europe are below pre-COVID-19 levels and Volkswagen said in September the trend could continue for the foreseeable future.

Sales at EV maker Tesla fell 43.2% in August, and those for China's SAIC Motor were down 27.5%.

The shrinking EV sales are partly because of diverging policies on green incentives across the EU, while regulators have imposed hefty tariffs to try to keep out cheap Chinese EVs, potentially adding to purchase prices.

To try to revive the market, Germany agreed in September on tax deductions of up to 40% for companies on their EV sales.

Campaign group Transport & Environment, however, said the market will recover, predicting battery electric cars will reach a total market share of between 20% and 24% by 2025 in the EU, mostly because of lower selling prices.

Hybrid electric cars (HEV) have already gained traction in the EU in recent months, as buyers see them as an affordable compromise between all-combustion and all-electric.

HEV sales rose 6.6% in August, to a market share of 31.3%, the ACEA data showed.