OOH La La Le Paris Auto Show Sizzles With Sexy New Models(Cars Guys Cars!)

FRANKFURT, Sept 20 Madeline Chambers writing for Reuters is reporting that 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 bold 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 percent 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 roaring 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.

Z4 CENTRE STAGE

One of the biggest

BMW Z4 2003

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.

Audi A8 2003

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.

Jaguar XJ 2003

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.

MASS MARKET

Renault Meganes 2003

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 euros ($2.06 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 relives the success of the previous generation and itsScenic 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 percent increase on the last generation, as ambitious.

Fiat Stilo 2003

Ford StreetKa 2003

Elsewhere in the midsegment, Italy's Fiat , will try to revive its fading fortunes with the Stilo stationwagon.

Ford Motor Co will unveil its new 3-door Fiesta and its minicar Streetka while General Motors Corp 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.

BREAKING NEW GROUND

The European sports utility vehicles market, comprising four percent of the European car market now and expected to rise to 5.5 percent in 2006 according to JDPower, will be boosted by offerings from Porsche and VW.

VW will take the wraps off its new

VW Touareg 2003

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 percent in 2004 from 25 percent in 2001 and noted that VW aims to increase the porportion of the market that VW address with models to 90 percent in the medium term from 75 percent now by entering new segments.

Customers will be scouring the model

Porsche Cayenne S 2003

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 September 28 to October 13.