Michael McAleer previews next week's Paris motor show where many of the marques will be launching important new models
Europe's carmakers hope to dazzle potential customers at next week's Paris auto show with new fast cars, luxury sports utility vehicles and a new take on the family saloon.
The manufacturers, aware that some of the cars unveiled at Paris have the potential to make or break them, are looking to new niches to persuade European consumers to start buying again as the industry struggles with 30 per cent overcapacity.
Behind the glitz of the biennial show, profits are suffering from sagging European demand and fierce pricing pressure.
Companies can cut costs and capacity as much as they like but ultimately their fortunes are tied to the allure of their cars.
"With faster new model development, the increased proliferation of segments and greater competition, there is an intensifying pressure on automakers to keep their model ranges young in order to maintain share and keep prices firm," said CSFB in recent research.
Highlights at Paris will be Renault's bold new Megane and BMW's Z4 sports car.
In the sports utility segment, in which many of Europe's automakers have failed to make much headway, Porsche will showcase its Cayenne and Volkswagen will take the wraps off its long-awaited Touareg.
"This year roughly half the European group are showing new models of genuine significance either for earnings or strategy," said Schroder Salomon Smith Barney in recent research.
One of the biggest crowdpullers will be BMW's racey new Z4 roadster, successor to a retro Z3 which was famously premiered by Pierce Brosnan as James Bond on the big screen.
However, its ability to enhance BMW's brand will be the main significance of the bigger and more modern-looking Z4 as its planned annual sales volume of around 40,000 units does not make it an earnings driver on the scale of the new 5-saloon series, expected next summer.
Other options for the super rich eyeing new large saloons include the Audi A8 and Phaeton from the VW stable, DaimlerChrysler's Maybach limousine, and the powerful Jaguar XJ from Ford's Premier Automotive Group.
Some industry experts predict too many competing models in the superluxury segment, especially if the economic situation deteriorates and a military conflict in Iraq develops.
"I have my doubts because in previous downturns we have found that demand for luxury goods is cyclical too," said Karel Williams, a motor industry researcher at Manchester University.
The manufacturers argue demand is elastic in this segment.
"Our understanding is that the segment is defined by product offerings. We are not fighting for a limited number of customers," BMW chief executive Helmut Panke said recently. BMW gains the rights to build Rolls Royce cars from next year.
For consumers with more modest means, Renault is banking on a warm reception for its mid-sized Megane car, with its bowed rear window and protruding boot. Having spent €2.1 billion on it, the Megane II has to pay off for Renault.
"If the Megane fails to take off, things will be looking nasty for Renault," said one London-based analyst.
The French automaker's line-up has aged recently and it is imperative for the Megane II to relive the success of the previous generation and its Scenic derivative, which accounted for a third of group sales.
Most analysts view Renault's target of selling 5.5 million Meganes over the life cycle, a 10 per cent increase on the last generation, as ambitious.
Elsewhere in the mid-segment, Italy's Fiat will try to revive its fading fortunes with the Stilo stationwagon.
Ford Motor Co will unveil its new three-door Fiesta and its minicar Streetka while General Motors hopes to tap a new segment with its Meriva mini multi-purpose vehicle, to compete with Ford's Fusion.
"The aim of these niche vehicles is to get the most out of a small number of platforms and respond to the demand for maximum interior space," said Charles Young of forecaster JDPower LMC.
The European sports utility vehicles market, comprising 4 per cent of the European car market now and expected to rise to 5.5 per cent in 2006 according to JDPower, will be boosted by offerings from Porsche and VW.
VW will take the wraps off its new Touareg, named after a people in the Sahara famed for their ability to adapt to difficult conditions. The vehicle represents a further strategic push upmarket as well as a foray into a new segment.
SSSB analysts expect VW's share of sales from upscale models to rise to 33 per cent in 2004 from 25 per cent in 2001 and noted that VW aims to increase the porportion of the market that VW address with models to 90 per cent in the medium term from 75 per cent now by entering new segments.
Customers will be scouring the model to see how closely it resembles Porsche's Cayenne, as the two models were developed together. As only the third product line for the world's most profitable carmaker, the SUV will propel groups earnings upward. The Paris auto show is open to the public from Satruday, September 28th to October 13th.