“The demand for cars has picked up noticeably,” said Klaus Wohlrabe, analyst with the Munich-based ifo institute, adding that the increase had “considerably improved the mood among executives.”

The Ifo business confidence index for the car industry last month edged up to 20.4 points last month from 20.2 in September.

However, the Ifo index measuring expectations for the months ahead in the industry fell for the fourth consecutive month from 27.6 points in September to 17.7 in October.

Three-quarters of the cars built in Germany are exported, and demand on foreign markets is likely to be somewhat weaker in the coming months, Ifo said.

Total exports of German cars in the first three quarters were 34 per cent down on the previous year with auto makers planning to reduce staff.