The forecast fall of about 23 percent from last year stands in contrast to strong German auto exports to emerging economies such as Brazil, China and India.
Trade figures in France on Tuesday showed sales of new cars falling by 18.7 percent on a 12-month comparison, the sixth fall in six months. Data in Spain revealed a slump there of 37.6 percent on a 12-month comparison, taking overall sales down to the level of 15 years ago.
In all three countries, an important factor in the slump of 12-month comparisons was the ending of government subsidies to support the auto industry at the height of the economic crisis.
In 2009, German “cash-for-clunker” subsidies boosted domestic sales despite a sharp economic downturn, making this years' figures weaker by comparison.
VDA president Martin Wissmann was nonetheless quoted as saying that "the German auto industry is pulling out of the crisis faster than we expected.
"We can thus raise our outlook for the domestic market," said Wissman. Germany is Europe's biggest, where VDA had earlier expected sales of between 2.8 and 2.9 million vehicles.
German car specialist Stefan Bratzel from the University of Applied Sciences in Bergisch Gladbach near Cologne pointed to "a much better economy than in most other countries and reduced unemployment" as key factors for the revision.
Willi Dietz from the German Institut for Automobilwirtschaft at Nuertingen University said: "The private sector is weak but businesses such as registration, rentals and so on, are very strong."
The German economy is also Europe's biggest, and is expected to grow by 3.4 percent this year, in large part owing to rising auto exports.
VDA forecasts an increase of 21 percent in exports this year and a gain of at least 10 percent in overall production.
For 2011, the two experts have pencilled in sales of 3.1-3.2 million cars. German sales for October were expected later on Tuesday and would likely show the 11th fall in a row, although the pace appears to be slowing from earlier in the year.
Germany, like France and Italy, is the "perfect example" of a situation whereby the economy picks up while auto sales decline, another German expert, Ferdinand Duedenhoffer said.
Another mature auto market, Japan, reported on Monday that sales of new cars had dropped by 26.7 percent in October after subsidies for environmentally friendly autos expired.
Strong exports have meanwhile given shares in leading German automakers a fillip, and those in BMW and Volkswagen are leading gainers on the Frankfurt stock exchange's DAX index with rises of around 65 percent this year.
VW aims to overtake Toyota as the world's leading automaker, a target both Bratzel and Dietz termed "ambitious" but possible.
Bratzel said VW had to gain a stronger market share in the United States where local factories must make sports utility vehicles that are "a bit larger without losing their VW genetic code" that provides better fuel efficiency.
Dietz pointed to India, saying that if VW is successful in the strong market where its Japanese ally is well positioned "I think they will beat Toyota."
To stay ahead, Dietz noted that Toyota would have to strengthen its position in China, where it faces historical resistance.
"The question is can Toyota overcome the cultural barrier which is deeply rooted in the history of both nations," he said.