Europeans Carmakers Target Offroad Market

PARIS, Sept 27, 2002; Michael Steen writing for Reuters is reporting that with rising oil prices and tighter restrictions on fuel emissions, now might not seem to be the best time for European carmakers to start pushing gas-guzzling monsters with the aerodynamics of a brick.

But that is exactly what they are doing at this week's Paris motor show, aiming to hitch a ride from their U.S. counterparts who have created a booming market for spacious four-wheel drive vehicles, dubbed sports utility vehicles or SUVs.

Despite their offroad image, most SUVs spend most of the time on tarmac, drawing criticism from environmentalists for their wasteful design.

Europe's biggest carmaker, Volkswagen, and its most profitable, Porsche (XETRA:PSHG_p.DE - News), have both launched SUVs at the show, the chasis for which they jointly developed.

In common with the other carmakers, they predict more than half of their SUV sales will be in the United States, but VW in particular is hoping also to tempt Europeans with a diesel model that keeps fuel consumption and running costs slightly lower in what is already a fast growing market.

"Sport utility is gaining ground in Europe month by month," Juergen Hubbert, the head of DaimlerChrysler's (XETRA:DCXGn.DE - News) luxury Mercedes unit, told Reuters.

Auto forecasting group JD Power estimates the market for SUVs in Europe will rise from four percent of all car sales at present to 5.5 percent in 2006. That contrasts with the United States, where every other passenger vehicle sold is an SUV.

A typical luxury SUV, costing anything between 35,000 and 100,000 euros (dollars), consumes between seven litres of fuel per 100 km (62 miles) for the most efficient diesels, and 17 litres per 100 km for a fast petrol model.

Hubbert, whose unit makes the M-Class Mercedes SUV, said there was the start of a trend in the United States, where fuel prices are much lower than Europe, of paying attention to fuel economy. But this was no reason to stop building SUVs.

"I think what really needs to be thought about is the technology of the engine rather than trying to rob Americans of their love of big cars," he said in an interview in Mercedes' home city of Stuttgart this week.

His counterpart at DaimlerChrysler's Chrysler arm, Dieter Zetsche, is looking to increase sales of Jeep SUVs in Europe.

"This year we have a 30 percent increase (in Europe) in the compact SUV segment and we have accomplished a 45 percent improvement with Jeep," he told Reuters. "This is about the only market segment which is growing."

TOO LATE?

The question for Porsche's new Cayenne SUV and VW's Touareg version is whether they have jumped on the bandwagon too late.

Porsche chief executive Wendelin Wiedeking said the cars his company builds should never be trendy and the Cayenne, the fastest SUV on the market, would expand the market rather than have to fight for existing customers.

"It's not for no reason our 911 (sportcar) has been on the market for 40 years," he told Reuters. "Now that the German carmakers are in the SUV segment -- Mercedes, BMW, and ourselves, we are bringing quality to the market."

BMW chief executive Helmut Panke, whose firm sells about 100,000 X5 SUVs a year and will introduce a smaller X3 in 2004, said in Paris this week he believed the market had already taken shape when BMW launched the X5 in 2000.

"At the end of the 1990s the SUV market was segmenting and diversifying in the same way as the car market had in the decades before," he said. "A volume manufacturer would have been terribly late with its entry into the SUV market."

Volkswagen, a volume manufacturer, denies it is late with Touareg, a chunky offroader with the leather seats and high-end stereo that is de rigueur for luxury SUVs.

"I do not agree with that statement on volume," said Bernd Wiedemann, a senior VW executive who listened to Panke's speech. "This is not a volume segment. The Touareg is a high-tech vehicle for which you have to pay a premium."

The world's biggest carmaker, General Motors, is also betting there is some way to go before customers grow bored of SUVs. Tucked behind a stand at the motor show displaying an environmentally friendly concept car is the new H2 Hummer.

A commercial version of the wide bodied, armour-plated vehicles used by the U.S. army, it costs 75,000 euros and guzzles between 18 and 21 litres of fuel every 100 km. Refilling its fuel tank would cost about 120 euros in Europe.

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