* Peugeot-Citreon sees demand dropping less than 7 pct

* Minister sees decision on scrapping scheme end Oct.

French car maker PSA Peugeot Citroen (PEUP.PA) sees total car demand in Europe in the second half of the year falling less than expected, its head said on Wednesday. Europe's second largest car maker behind Germany's Volkswagen (VOWG.DE) has been expecting car demand to drop 7 percent in the six months to Dec. 31 against the same period last year.

We are in line, actually better than this forecast, PSA Peugeot Citroen Chief Executive Philippe Varin told reporters on the fringes of a visit to a technical centre outside Paris.

The event was attended by France's industry minister Christian Estrosi who said he hoped the French government would decide by the end of October on the future of the car scrapping scheme, introduced last year.

The scheme has proved a genuine boon for carmarkers battling the most severe drop in demand in recent history.

Estrosi also said the government was considering tilting the scheme in favour of clean vehicles. (Reporting by Gilles Guillaume, writing by Astrid Wendlandt; editing by Jon Loades-Carter)

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