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BERLIN (Bloomberg) -- German car sales will probably rise 6.9 percent next year as falling unemployment and rising payrolls in Europe's largest economy boost demand, the country's automotive industry group said.

Deliveries in Germany, Europe's biggest auto market, are likely to increase to 3.1 million vehicles in 2011 from 2.92 million this year, Matthias Wissmann, head of the Berlin-based German carmakers' association, or VDA, said.

“The recovery is slowly taking hold in consumption,” Wissmann, a former transportation minister, said. “We expect a stable uptrend” in the country's automotive industry.

German unemployment fell for a 17th month in November while business confidence surged to a record, helping to boost demand. Carmakers including BMW AG, Mercedes-Benz and General Motors Co.'s Opel brand are shortening Christmas breaks at factories to meet surging demand.

Wissmann said domestic orders at German-based carmakers have been growing “steadily and at a gathering pace” since September. Capacity utilization in the German auto industry has rebounded to 85 percent in the fourth quarter from 62 percent in last year's second quarter, he said.

German-based carmakers' production will probably increase 5 percent next year to a record 5.8 million units while exports may grow by the same margin to a record 4.4 million vehicles, according to VDA.

6% November drop

Car sales in Germany fell 6 percent in November to 262,600 units, slowing the decline in year-to-date deliveries to 25 percent or 2.68 million units, the VDA said, citing preliminary figures.

“It was clear to everybody that there would be a drop following last year's sales-incentive program,” Wissmann said at a news conference Thursday.

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