New car sales in Germany plunged by 30% last month, according to data from the automakers' federation FDA showed.
Output fell in July by 5%, however, as exports expanded by just 6%.
In Germany, a total of 237,500 new vehicles were registered in July, a figure which compared unfavourably with the same month in 2009 owing to a car scrapping scheme that boosted domestic sales last year.
In recent months, strong exports have allowed German manufacturers to ramp up production but in July, sales outside the country came in at a relatively modest 312,400 vehicles, and production slipped to 388,400 units.
The slowdown has been seen across Europe, with new car sales off in July by 26% in Italy, 24% in Spain and 13% in France.
German automakers have nonetheless managed to unveil very strong results in recent days, mainly owing to soaring demand in China.
