Page last updated at 15:44 GMT, Sunday, 13 September 2009 16:44 UK

Crowded car industry eyes electric future

By Jorn Madslien
Business reporter, BBC News, Frankfurt

Opel Astra in Frankfurt
Opel's new Astra is vital for the company's future

The global motor industry is gathering in Frankfurt this week for its first jamboree after a crisis that saw the bankruptcy of both General Motors and Chrysler, with rivals slashing production in the face of plunging demand for cars.

Bankruptcy filings in the US and cut-backs elsewhere have been painful, in particular for workers fired from long-held jobs. Many of them have little chance of gaining similar employment in the future.

The pain has been shared by investors, with shares in automotive companies hitting fresh lows during the year. Only the most bullish observers expecting significant recovery of portfolio valuations in the near future.

Yet the crisis has done little to weed out the weak and thus address the industry's chronic ailment: overcapacity.

"We've just passed through one of the best opportunities in over a decade to see real capacity taken out of the industry," says Michael Tyndal of Nomura International.

"Governments have got involved because it's a politically sensitive sector and we're coming through the other side of the downturn with the same number of companies, maybe more, and the same number of brands."

Working together

Most of them will be in Frankfurt, but by no means all.

Motor shows are expensive affairs, so some cash-strapped carmakers - such as Nissan, Honda, Mitsubishi, Daihatsu and Cadillac - have opted to stay away.

But the largest players in the industry will still be here, and they all have great ambitions to expand their operations and grab larger chunks of the market.

Rolls-Royce Ghost
Rolls-Royce hopes its Ghost will boost sales

"Ford, Toyota and Volkswagen Group are looking to scale globally," observes Erich Merkle of Autoconomy.com.

Others are joining forces with former rivals to share the cost of costly research and development of new technologies or to reach new markets - with Fiat taking control of Chrysler, and with the German carmakers BMW and Daimler increasingly working together, both with each other and with French firms Renault and PSA Peugeot Citroen.

"In terms of the amount of money being spent on technology, it makes sense for companies to work more closely together," says Mr Tyndall.

"My hope, which I suspect will be dashed, is that we see some announcement in terms of alliances."

German dominance

The Frankfurt show will be dominated by the home teams, with German carmakers unveiling 42 out of the show's 82 world premieres - both concepts for the future and models ready to hit the road.

"Despite the financial crisis the 63rd IAA Cars is stable: 753 exhibitors from 30 countries will be represented at the world's most important trade fair for mobility, including 62 vehicle manufacturers.

The 82 world premieres will provide the visitors with a glittering display of innovations.

People are hoping we're coming out of the crisis - but everyone's still nervous and very much focused on the short-term.
Stuart Pearson, Credit Suisse

In particular the models from the German OEMs, whose 42 world premieres make up the lion's share of the innovations, will show the way forward for future growth and a high level of environmental compatibility," stressed Matthias Wissmann, president of the German Association of the Automotive Industry (VDA).

The sixth generation will be the show's main attraction, crucial as the model is to the future of Opel and its UK subsidiary Vauxhall.

Chief rival Ford has little to show this year after last year's new model onslaught, though its C-Max has been redesigned.

Electric vehicles

But arguably, an even more important model than the Astra on the Opel stand will be its Ampera plug-in petrol electric hybrid which points the way towards a future where electric cars are set to become ever more important.

There will be a broad range of electric vehicles in various forms of completion - from pure concepts to ready-for-the-road - on display from the likes of Renault, Hyundai, Toyota and Ford.

Audi R8
Audi is bringing electrics to its supercar, the R8.

There are also clear signs that electric cars and petrol-electric hybrids are becoming desirable for wealthy drivers, with Mercedes launching an S-class hybrid and BMW displaying a similar version of its 7-Series, and Audi bringing electrics to its R8 supercar.

BMW and Mercedes are also displaying diesel-electric hybrids for the first time - a solution that had been dismissed for years as too expensive by hybrid-leader Toyota.

And increasingly the hybrids are kitted out with plugs, marking a shift in terms of consumer spending away from conventional oil companies towards utility firms producing electricity in wind farms and the likes or in more conventional coal fired or nuclear power plants.

Tough times ahead

Upmarket models will include Jaguar's new XJ, unveiled during summer, and Aston Martin's four-door Rapide.

Bentley will show its Mulsane which will challenge Rolls-Royce's current customers, with Rolls-Royce gunning for Bentley buyers with its new Ghost.

Ferrari 458 Italia
Ferrari's 485 Italia will face stiff competition

Ferrari will be here with its 430 replacement, the 458 Italia which will be challenged by McLaren's 12C - launched last week in the UK. Porsche will be back with yet another 911 Turbo - its seventh.

But though the industry is clearly ready to steam ahead, concerns remain about the future.

Recent bangers-for-cash schemes that have encouraged people in a number of countries to scrap old cars and replace them with new ones are coming to an end, with few signs of growth in demand from consumers.

Next year is set to be at least as tough as this year, with some estimates suggesting sales to plunge by a fifth.

"People are hoping we're coming out of the crisis," says Credit Suisse analyst Stuart Pearson.

"But everyone's still nervous and very much focused on the short-term."



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