The Bentley Flying Spur, powered by a 6.0-litre, twin turbo, 616 hp, W12 engine, can make 200 mph. The price starts north of $200,000. (Bentley)
Gas-guzzling fantasy machines are to the fore at this year's annual Geneva Motor Show, no surprise given that most of the European auto industry is losing huge amounts of money trying to sell the plain vanilla variety.
New Bentleys, Rolls-Royces, Ferraris, a McLaren P1 and a Chevrolet Corvette Stingray convertible will be competing for the spotlight. Middle-class Europeans will gather in Geneva to pursue their fantasies, but mostly will be keeping their wallets shut, even when they see the affordable stuff.
Europe faces another year of economic recession, and those with jobs are slashing spending on non-vital products like cars and making provisions for the worst-case scenario, hoping that unemployment won't be darkening their doorsteps any time soon.
The European Union's executive arm, the European Commission, forecasts that the eurozone economy (that's the 17-nation group including Germany, excluding Britain, which shares the euro single currency) will shrink this year 0.3 percent. That's the second year in a row of contraction and the third in the last five. Unemployment is expected to average 12.2 percent, and if that sounds bad enough, remember that this includes chronically weak economies like Spain and Greece, which are likely to have jobless rates of 26.9 percent and 27 percent, according to the commission.
Car sales in Western Europe are approaching a 20-year low, and are expected to fall again this year by another 5 percent. Forecasters don't sound very convinced when they say maybe, just maybe this year will be the trough, and sunlit uplands lie ahead.
Last year was horrendous for the non-German domiciled mass car manufacturers. Peugeot-Citroen of France was the worst performer with a massive net loss of $6.7 billion, compared with a net profit of $780 million in 2011. The bulk of the losses came from a multibillion euro write-down. The automotive division reported an operating loss of $2 billion for 2012. Compatriot Renault posted a small loss of $33 million after a profit of $440 million the year before. Ford Europe lost $1.75 billion and expects to lose more in 2013. Fiat lost close to $1 billion in Europe and expects about the same this year. GM Europe's Opel-Vauxhall lost $1.8 billion in 2012, said 2013 would be slightly better, and retained its target of breaking even by mid-decade.
In sharp contrast, Volkswagen of Germany, Europe's market leader, earned $15.2 billion in 2012 before interest and tax, about the same as 2011, and expects a similar performance this year. Fellow German premium car maker Mercedes performed profitably. BMW has yet to announce its results, but fat profits are likely.
Vic Heylen, director of the Flanders Centre for Automotive Research, in Antwerp, Belgium, calls this the Great European Divide.
"Geneva will show what the European car industry can do best: producing sports and luxury cars that are the envy of the world. While at the same time showing that it has little to offer with regard to bread-and-butter cars, for which there seems to be no demand on the world markets. Peugeot-Citroen, Renault and Opel do not even offer cars in the U.S.," Heylen said.
There does seem to be a huge number of pricey supercars being launched at the show, which until recently saw a keen push to green vehicles. There's the 6.2 liter 450 hp V8 Chevrolet Corvette Stingray convertible, the Rolls-Royce Wraith luxury coupe, Bentley Flying Spur, and Ferrari F150 Enzo. The price of the Enzo is expected to start at $1.3 million. The 200 mph Flying Spur, at more than $200,000, is powered by a 6.0-litre, twin turbo, 616 hp, W12 engine. More down-market, the BMW 3 Series Gran Turismo, a 3 series with a hatchback, will debut, as will the little Mercedes CLA.
Professor Ferdinand Dudenhoeffer of the Center for Automotive Research at the University of Duisburg-Essen thinks this obsession with luxury cars might be a political mistake.
"Geneva is in danger of becoming the starting point of a new horsepower race by the German automotive industry. That could jeopardize the reputation of the entire industry, which could be labeled as socially irresponsible," Dudenhoeffer said.
That could end up being more dangerous than just inducing raised eyebrows because the European industry is trying to negotiate with the EU the terms of new rules that aim to slash fuel consumption to an average of 60 miles per U.S. gallon by 2020. German luxury manufacturers want to be able to continue selling their highly profitable gas guzzlers in return for producing a number of zero or low emission cars, which would lose money.
China threat in four or five years
Another threat to the European mass car manufacturers at the Geneva show is the Qoros compact gas-electric hybrid saloon, built in China by a partnership of Chery and investment company Israel Corporation. The Qoros promises to undercut Europeans on price, but quality and safety questions remain. Earlier Chinese attempts to sell cars in Europe crashed and burned. Qoros sales in Europe start toward the end of this year.
Most experts don't see much of a threat yet from China. Max Warburton, analyst with Bernstein Research, doesn't expect this will happen for at least five, probably 10, years.
Tim Schuldt, analyst with Equinet Bank in Frankfurt, Germany, thinks it might happen sooner.
"The new Qoros is not very dangerous. To be successful takes more than a decent product, although we can't say it is yet, but you need a proper sales network. That takes time. The Chinese might not be risky today for Europeans, but they will cause problems in four or five years. They will enter the market (in a big way) sometime, but the question is when," Schuldt said.
Meanwhile, the big players in Europe will have to ride out the current economic climate.
"Sales are going down in 2013, but the question is, how much? Will the second half switch to positive? I'm not sure, but for sure now it's miserable," Schuldt said.
Given the huge losses, will any company be forced to close?
"If this was a normal business, maybe, but car manufacturing is not normal because of political influence. Peugeot would be bankrupt by now if the French state hadn't protected it, and will probably continue to protect it," Schuldt said.
FCAR's Heylen doesn't see much relief in sight for Europe's beleaguered companies.
"European mass-volume producers are not expected to recover until after South-European countries (like Italy, Spain, Greece) will have sorted out their financial and subsequently economic problems. Is this going to happen before 2020? Will the mass producers be able to hold their breath until then? It remains difficult to imagine how Opel will end a 20-year run of losses under these conditions," Heylen said.
New models at Geneva
Despite its huge losses, Opel-Vauxhall has been relentlessly pursuing a new model program with the little Adam city car and Mokka compact SUV. At Geneva it will unveil the Cascada convertible. Even basket case Peugeot will unveil an interesting new technology product with the 2008 HybridAir (2008 is a model number, not a year), which uses compressed air power to back up the gasoline engine, not electricity. The "cutest" title may go to Fiat's little Alfa Romeo 4C sports car. The rear-drive, two-seater 4C goes on sale this year in the U.S.
The Geneva car show is open to the public from March 7-17.
Neil Winton, European columnist for Autos Insider, is based in Sussex, England. Email him at email@example.com.