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Last Updated: Friday, 6 January 2006, 10:18 GMT
Small cars are the stars at Detroit show
By Jorn Madslien
BBC News business reporter

The return of the car - as opposed to large and thirsty "trucks" - will set the tone at this year's motor show in Detroit, although automakers are making very different predictions about what consumers want.

Key models unveiled at the Detroit motor show

Motor City's loyal locals will no doubt applaud the latest hints at future models from Detroit's own General Motors (GM) and Chrysler when the show opens for the media on Sunday.

Both groups are unveiling powerful retro-styled coupe concept cars in response to Ford's hugely successful Mustang, which was launched last January at the consumer-focused Los Angeles auto show.

Ford, meanwhile, will unveil a convertible Mustang.

Detroit's loyal locals will also be pleased by the show's revival as the most important car exhibit in the US calendar.

Last year, most exciting car launches were held in LA, while Detroit was left with rather dull also-runs.

Overtaking GM

This year, the GM Chevrolet Camaro and Chrysler's Dodge Challenger are anything but dull; enthusiasts of "pony car" - cars similar to the original Mustang, hence the nickname - are already showering them with praise.

Mark Fields, president of Ford's operations in the Americas at the LA motor show
Ford's Mr Fields says it is time to hit back

Yet, these muscled concept cars are unlikely to capture the imagination of mass-market drivers increasingly eager to ditch their thirsty sports utility vehicles (SUVs) after crude oil prices spiked above $70 a barrel in the wake of Hurricane Katrina.

"The rise in gas [petrol] prices due to Hurricane Katrina left a lasting impression on the minds of consumers," observes KPMG automotive analyst Betsy Meter.

Japanese and other Asian carmakers appear to be best prepared to serve the burgeoning market for smaller cars.

Toyota is introducing a hybrid version - combining petrol and electric power - of its best-selling Camry.

"That's going to be huge," says Global Insight auto analyst Rebecca Lindland.

Toyota's upmarket Lexus subsidiary - which is the best selling luxury brand in the US - is also cashing in on strong demand for hybrid vehicles.

This is going to be the year we're going to see the Koreans surge forward
Peter Morici, University of Maryland

Analysts say both the Camry and Lexus models should help the Japanese automotive group sell more cars than GM, the global leader.

"Heightened interest in fuel costs and the environment and dependence on foreign oil really stimulated that interest in hybrids," says Jim Press, president and chief operating officer of Toyota Motor Sales USA.

Rival Nissan will show off its small Versa and Sentra models, while Hyundai will unveil its HCD-9 Talus concept car - a hint at future sports cars from the South Korean car maker.

"This is going to be the year we're going to see the Koreans surge forward," says Peter Morici, business professor at the University of Maryland.

"Hyundai is ready to make an assault on Chevy and Pontiac because they have more attractive offerings with a better warranty."

American response

Asian car makers are roaring ahead in the US market, while Detroit-based companies are suffering

"I think you can call Detroit an island surrounded by prosperity," says Burnham Securities analyst Dave Healy.

Ford Edge
The SUV may be sick, but it is not dying

Toyota, Nissan and Hyundai all saw US sales rise about 10% last year, with Nissan crashing through the one million cars mark.

But the incumbents are not giving up without a fight.

"It's time to play offensive," says Mark Fields, president of Ford's operations in the Americas.

"We believe 2006 will be another year in which car sales will likely gain market share in the industry," acknowledges Ford Motor analyst George Pipa.

Ford is showing off a hybrid concept that is not only small, but also provided with an additional power source: solar panels as well as a diesel engine and a battery.

US car makers are also targeting the strong market for so-called "cross-over" vehicles which combine the driveability of cars with the high ride of people carriers.

"The designs of these vehicles are fresh and something different, and they are capturing consumer's attention," says Erich Merkle, director of forecasting for Grand Rapids.

Moreover, although the SUV market is shrinking, it is not dying.

Toyota concept car
Toyota's innovative technology has bowled over US car buyers

"The profits from these models have been huge," said David Healy an auto analyst with Burnham Securities.

So rather than killing them off, the carmakers are trying to prolong their lives by reducing their height and bulk to make them more like their European rivals, such as the Porsche Cayenne, Volkswagen Touareg and BMW X5.

As such, the Ford Edge, which enjoys its premiere in Detroit, could be one way forward for the Motor City automotive groups.

"This is still a big [and] popular segment that meets the needs of many consumers," says Mr Pipa.


BBC NEWS: VIDEO AND AUDIO
See some of the cars on show in Detroit



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