"The British economy is deeply woven into other EU countries," Matthias Wissmann, president of the German Association of the Automotive Industry (VDA), told AFP by email. "A hard Brexit would be tough and expensive."
In a high-profile speech on Tuesday, May announced plans to quit the European single market as well as the 28-member European Union following Britons' vote to leave in June last year.
"Brexit must mean control of the number of people who come to Britain from Europe," May said. "What I am proposing cannot mean membership of the single market."
Since the Brexit vote, European leaders have insisted that Britain cannot "cherry-pick" elements of the single market by clinging to free movement of goods, services and capital but not labour -- the "four freedoms" that form the single market.
The prime minster added that she still wanted "tariff-free" trade with Europe and "frictionless" business ties in a new deal with the EU.
"Years will go by before new treaties are a done deal," VDA's Wissmann predicted. "Prospects like that scare away investors."
Britain is the German car industry's largest export customer, Wissmann noted, adding that 57 percent of all British car industry exports are destined for the EU.
Around one in five cars produced in Germany is sold in the UK, according to the VDA, while German firms operate around 100 sites producing cars or components in Britain.
"Car firms have a large interest in solutions being found that continue to allow intensive trade and the wealth creation associated with it," Wissmann said.
May should "ensure the UK's negotiations with the EU result in uncomplicated, tariff-free access to the EU single market in future," a spokesman for luxury carmaker BMW, which operates four sites in the UK, told AFP in a statement.
"Not only free trade but also cross-border employment opportunities and unified, internationally applied regulations are of proven benefit to business, the economy and individuals," the spokesman said.
Britain is expected to formally notify EU authorities of its intention to leave by the end of March, triggering a two-year negotiation on the terms of its departure from the bloc.