The Motor Industry Association says an increase in the number of new cars being registered indicates the effects of the recession are lifting.
The association's chief executive, Perry Kerr, says new vehicle sales are directly impacted by business confidence.
Mr Kerr says registrations of new passenger cars in July were up nearly 10% on the same time last year.
He says commercial registrations were also up by over 17% - an indication of how well the economy is doing overall.
The car industry has also suffered lack of stock over the past three months as a result of the Japanese earthquake and tsunami which affected production at some plants.
However, Mr Kerr says stock levels are slowly returning to normal as Japanese manufacturers begin to work again.