* Vehicle sales down 16.5 percent, market share stable
* Passenger car sales down 13.7 percent
* Achieved 'significant' positive free cash flow in H1
* Shares up 1.6 percent at 0826 GMT
(Adds further details, share price, analyst comment)
By Helen Massy-Beresford
PARIS, July 17 (Reuters) - French carmaker Renault said vehicle sales fell 16.5 percent in the first half, matching the rate of decline in the overall market, though its business managed to generate cash.
Its sales of passenger car sales fell 13.7 percent, a slower rate than the global market, it said.
"It's not a surprise, but it's good news," said a Paris-based analyst.
Renault shares pared early gains of around 3 percent to trade up 1.6 percent against a DJ Stoxx European Autos Index up 1 percent by 0826 GMT.
Renault's larger rival PSA Peugeot Citroen last week said first half sales -- including completely knocked-down (CKD) kits sold for assembly in other markets -- fell 14 percent in the first six months.
European car sales rose 2.4 percent in June, but were down 11 percent over the first six months of the year, industry association ACEA said earlier this week. It linked the June increase to government cash incentives to drivers trading in old cars for new models.
A Renault spokeswoman would not say whether the free cash flow was above or below the level of 16 million euros it recorded in the first half of 2008. The group is due to report first half financial results on July 30.
DACIA STRENGTH
Renault brand sales were down 21.5 percent in the first six months, with car sales 19.1 percent lower and light commercial vehicles (LCV) posting a 33.2 percent drop. Renault launched five new models in the first half, including versions of its best-selling mid-sized Megane range and a new compact Clio.
Renault's Romania-based Dacia brand -- which makes the low-cost Dacia and Sandero models -- saw a 22.9 percent increase in passenger car sales to 146,160 units, but LCV sales were down 13.7 percent.
In the world passenger car market, where the Renault-Nissan alliance ranks 4th, group sales were down 13.7 percent, at 969,361 units, in an overall market 15.6 percent lower, pushing market share up by 0.1 points to 4.2 percent.
Renault said total vehicle sales -- including passenger cars and light commercial vehicles -- were down 16.5 percent worldwide, in a market that fell by the same amount, leaving its overall market share stable at 3.7 percent.
(Additional reporting by James Regan, editing by Marcel Michelson, John Stonestreet)