That is according to the Munich-based Ifo economics institute, which compiles the country's most-watched business survey. It says the situation in the auto industry improved at the start of the year, even though conditions for suppliers got worse.

"A possible reason for this is that automakers succeeded in getting customers on board with price increases, whereas suppliers have not," said Oliver Falck, director of the info Centre for Industrial Organization and New Technologies.

Germany's manufacturing-led economy has been slower than peers to recover from the pandemic amid a global supply squeeze that left almost a fifth of employees in the car sector furloughed in December.

New-car registrations fell 10 percent in Germany last year to 2.6 million vehicles, a decline largely triggered by the global shortage of semiconductor chips.

As the number of produced cars remains low and demand is high, automakers can demand higher prices, said Falck.

"The market for new cars has been cleaned out," he said. "So dealerships can sell their stock to customers without offering any discounts."