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Cars go small in Paris

October 10, 2008 15:05 IST

Auto shows tend to be a platform for glitz, glamor, stunning designs and new levels of excess, but that's all changing as carmakers struggle with the rising cost of credit that is blighting their customers. At the Paris Auto Show this weekend, European automakers are set to put on a brave face and strut small, fuel-efficient models as their answer to the growing problem of frozen credit markets.

"We will see a trend for smaller and more fuel-efficient cars," said Michael Tyndall, an industry analyst with Nomura International in London. "The upcoming EU legislation on a limit to C02 emissions, the demand from consumers for fuel-efficient cars and the fact the being green is seen as cool, are all contributing factors for the manufacturing of new cars."

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Perhaps the biggest problem is that consumers in one of the biggest markets for European carmakers--the United States--are increasingly unable to access the credit they need to purchase new vehicle. American auto sales in September fell by as much as 36.8 per cent, for some major carmakers.

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Overall, the industry sold only 964,873 vehicles, a 26.6 per cent slide from a year earlier and its biggest percentage drop in 17 years, Autodata said Wednesday, although European automakers were not amongst the biggest eight decliners, topped by Nissan, Mazda and Ford Motor.

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A key model that will illustrate the green push in Paris this weekend will be Citroen's fuel-efficient, Picasso C3, a 13.4-ft car that is designed to be "small outside, big inside." "Car manufacturers need to create the miracle of providing enough space to drivers but at the same time keep the trend for smaller and fuel-efficient cars, and the C3 gets very close to doing this," Tyndall said.

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But not everyone will be going small this weekend. Design will also be a key theme during the launch of new models this year with large, premium models like the BMW 7 series. The next-generation car by Bayerische Motoren Werke has been praised as one of the best designs for 2009, being 121 pounds lighter, yet slightly larger and wider than previous models, and sportier too.

Catering to the need for speed will be the Ferrari California V8, a highlight of the Paris Show, with its 4.3 liter V8 engine, and one of the fastest commercial vehicles on display.

All these new technologies are fascinating, said Ulrich Horstmann, an analyst with Bayerische Landesbank, but automakers are not all keeping up with the times or production. "By the time these vehicles are ready, consumer demands would have shifted. And car companies are not keeping up with the current demand for hybrid cars."

The Paris Auto Show, which is open to the public from Oct. 4-19, may manage to impress particpants with its cutting-edge technologies and designs, but carmakers will also have to consider the economic reality of consumers in Europe and North America if they want to strike the right chord.

A strengthening euro had previously been a bane to European carmakers, but the lack of access to credit has now added to their problems, and it seems to have hurt their American counterparts even more.

Javier Espinoza, Forbes
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