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FRANKFURT (Reuters) - German book retailers have teamed up with Deutsche Telekom to produce their own eReader to challenge the dominance of Amazon.com in the growing market for digital books.

Thalia, Weltbild, Hugendubel and Club Bertelsmann will start selling the 'Tolino' eReader from March 7, with over 300,000 books available for download, to compete with Amazon's Kindle and Apple's tablets, the companies said in a joint statement on Friday.

As in Britain, where chains like Waterstones have come under pressure from the likes of Amazon, German book retailers have also suffered.

Thalia, the biggest German book retailer is undergoing restructuring and closing shops and saw sales fall 2 percent to 915 million euros ($1.2 billion) in its business year to end-September.

"The future of the German book industry should remain in our hands and not those of listed American groups," Carel Halff of publisher and retailer Weltbild said.

While e-books make up over 10 percent of the book market in the United States, that proportion is at just 3.2 percent for the German market.

But the market is growing fast, with sales of e-books tripling in 2012 to 102 million euros, according to market research group GfK. E-books could account for 17 percent of sales on the German book market by 2015.

Amazon had total sales of $8.7 billion in Germany in 2012, more than its sales in the UK of $6.5 billion, according to a recent stock exchange filing.

An article by specialist magazine Buchreport earlier this month estimated Amazon had book sales of 1.6-1.8 billion euros in Germany in 2012, equivalent to a 20 percent share of the German book market, which was worth around 9.6 billion euros in 2011.

A spokeswoman for Thalia, owned by perfumes and beauty retailer Douglas , said the eReader partnership had not come too late.

"This is exactly the right moment," she told Reuters. "It's about offering the customer a good alternative to Amazon and Apple now, in order to secure a position in the market for the future."

The Tolino has a touch screen, a battery life of up to 7 weeks and can store around 2,000 books. Thalia said it will be selling the device at 99 euros. The cheapest Kindle on amazon.de is 79 euros.

The companies are open to other book retailers joining the partnership, they said.

($1 = 0.7649 euros)

(Reporting by Victoria Bryan; Editing by Elaine Hardcastle)