Shares in Europe's major car firms jumped Monday, following a report China, the world's biggest auto market, may slash purchase tax on many vehicles in a bid to juice sales.

Citing people familiar with the plans, Bloomberg News reported that Chinese regulators want to scut tax on passenger vehicles with engines smaller than 1.6 litres by half, to five percent.

German giant Volkswagen added six percent to trade at 145.04 euros ($165.29) by 1:00 pm (1200 GMT) in Frankfurt.

Meanwhile high-end BMW jumped four percent to 77.96 euros and Mercedes-Benz maker Daimler five percent to 53.91, against a DAX index of blue-chip German shares up 1.8 percent.

Component maker Continental was also sought-after, adding six percent at 144.20 euros.

China accounted for around 41 percent of the Volkswagen group's more than 10 million sales worldwide in 2017, compared with 600,000 each or around 25 percent of the global totals for high-end BMW and Mercedes-Benz.

In Milan, Italy's Fiat added 3.7 percent, sports car maker Ferrari gained 3.3 percent, tyre maker Pirelli 4.2 percent, and component supplier Brembo five percent.

By 1225 GMT in Paris, Peugeot maker PSA added 4.2 percent and Renault 3.5 percent, on top of 4.7-percent gains for tyre maker Michelin and boosts for other component makers.

The world's largest car market has floundered in recent months as Washington's trade war with Beijing weighs on growth and confidence in China.

Expansion slowed in the world's second economy in the third quarter, to 6.5 percent year-on-year -- its weakest pace since 2009 in the wake of the financial crisis.

Western carmakers, who have made big bets on demand for wheels among the country's rising middle class, had suffered as China slapped import tariffs on vehicles manufactured in the US -- also hitting many European carmakers with American factories.

tgb/bmm

PIRELLI & C. SPA

GROUPE PSA

VOLKSWAGEN

DAIMLER

FERRARI NV

CONTINENTAL

FIAT CHRYSLER AUTOMOBILES

Renault

BAYERISCHE MOTOREN WERKE AG

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