Europe’s Auto-Market Woes Overshadow Car Glam in Paris

Self-driving vehicles and smartphone integration will be among the top features at Europe’s biggest auto show this year, as executives focus on something that’s become increasingly hard to come by: buyers.

The nascent recovery in the region’s car market is already running out of steam after sales contracted for six straight years to a two-decade low in 2013. That puts pressure on carmakers at the Paris event, which kicks off this week, to showcase new technology and gimmicks like an even more powerful version of the ultra-luxury Bentley Mulsanne sedan and running lights shaped like Thor’s Hammer on the new Volvo XC90 sport-utility vehicle. With the European economy struggling, the efforts may not pay off.

“The outlook for Europe on the whole is darkening,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. The slowing growth and prospects for renewed declines in the second half “make me wonder if European car demand will manage to be positive for the year as a whole.”

Auto sales in the region grew 1.8 percent in August, the smallest increase this year. Deliveries in the fourth quarter are forecast to decline 0.3 percent, IHS Automotive estimates. Europe’s slowing recovery comes after the market tumbled 23 percent from the 2007 peak to 12.3 million vehicles last year.

Euro-zone economies didn’t have a real recovery, Jonathon Poskitt, an Oxford, England-based analyst for research company LMC Automotive, said today during a seminar held by Standard & Poor’s Ratings Services. “A profound absence of internal demand remains a major concern.”

Ford Loss

Ford Motor Co. yesterday forecast worse results in Europe than the company had expected, saying it will probably lose $1.2 billion in the market this year and $250 million next year. The second-biggest U.S. automaker cut its 2014 profit target. It had already reacted to the disappointing pace of recovery by reducing production of the Fiesta subcompact in Germany through the rest of the year.

“The question is if the pre-crisis level will ever be reached again,” Martin Winterkorn, chief executive officer of Volkswagen AG, the region’s biggest automaker, said in a Sept. 25 interview with German broadcaster N-TV.

Smartphone Integration

To kick-start demand, manufacturers are turning to gadgetry like vehicles that drive themselves and smartphone integration to win over consumers weary of being cut off from the rest of the world while behind the wheel. The advances are part of the response after the industrywide contraction left most mass-market carmakers unprofitable in the region, according to Max Warburton, an analyst with Sanford C. Bernstein.

Along with high youth unemployment, auto demand has been held back by a sputtering euro-area economy that prompted the European Central Bank to lower interest rates and announce other monetary stimulus measures in early September. That’s led manufacturers to woo consumers with new features.

Daimler AG’s Mercedes-Benz is rolling out an optional Stop&Go Pilot on models like the C-Class sedan. The feature enables the car to steer itself while matching the speed of the vehicle in front of it, including coming to a complete stop. Volkswagen’s luxury Audi brand plans to roll out similar technology soon.

In Paris, Mercedes will show an upgraded version of the B-Class hatchback, which automatically avoids collisions, as well as a 100,000-euro ($127,000) Mercedes GT sports car that will vie for buyers of models like the Porsche 911. Audi is showing the revamped TT roadster.

Driving Settings

Jaguar Land Rover intends to introduce the so-called Smart Assistant over the next two years. The system will use cameras to recognize the driver’s face, along with technology that picks up signals from smartphones to adapt climate-control and even driving settings for that person. The luxury unit of India’s Tata Motors Ltd. aims to grow with the more affordable Jaguar XE and Land Rover Discovery Sport models, which will make their public debuts in Paris.

For the chance to see the breadth the auto industry has to offer, the Paris Motor Show, which opens to the public on Oct. 4, attracted a record 1.2 million visitors the last time the auto industry gathered in the French capital in 2012. Social trends, though, suggest it will be difficult to convert these gawkers into buyers, said Tim Urquhart, an analyst at IHS Automotive in London.

“The market is changing with demographic factors at work, such as urbanization and younger potential buyers deciding they don’t need a car,” he said.

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