German car sales rose 6.1 percent in December as consumers brushed off an uncertain economic environment and bought more compact cars, high-margin vans and luxury saloons.
That helped secure growth of 8.8 percent for 2011, German motor vehicle authority KBA said on Tuesday.
Germany's car market was more stable in 2011 than many expected, automotive association VDA President Matthias Wissmann said in a separate statement.
Western Europe's car market is seen stagnating in 2012 at best, as consumer demand eases amid weaker economic growth, though data in Germany has raised some hopes that Europe's biggest economy may buck the trend.
Germany's Volkswagen and BMW retained leadership in their home market in 2011, with respective market share standing at 20 percent and 11.2 percent in December, according to KBA data.
Shares of BMW rose to the top of the German blue-chip index , gaining 4.4 percent, while Daimler was up 4 percent and Volkswagen traded 2.3 percent higher. The STOXX Europe 600 Automobiles & Parts was up 3 percent.
Asian rivals Toyota and Kia gained ground in Germany, expanding their shares to 3.5 percent and 1.8 percent in December, compared with 2.6 percent and 1.3 percent for the full year, helped by robust demand for compact cars.
Ford, Renault and Fiat, however, saw market share shrink during the year, to 7.1 percent, 4.5 percent and 2 percent, respectively.
The news on Germany's car market comes a day after data showed new car sales in Italy dived 15.3 percent in December.
U.S. new-vehicle sales for December are expected to show continued steady growth, but analysts say much of the gains are linked to buyers who delayed purchases, and therefore should not be seen as indicative of a strengthening economy.
BMW Chief Financial Officer Friedrich Eichiner told a German newspaper he expects growth opportunities in the U.S. and China to help offset a flat European car market this year.
German auto exports shrank 1 percent, but the VDA said foreign demand held up well as new orders from abroad increased by 10 percent.
We are already at a high level that is not easy to top, VDA President Wissmann said.
But we have reason for cautious optimism for the car market in 2012, he said, adding financial market stabilisation would be crucial.