FRANKFURT (Reuters) - Auto executives are gathering in Geneva next week with a sense of foreboding in the aftermath of Volkswagen’s diesel emissions test cheating scandal. European demand and industry profits are up, but so too is regulatory pressure to cut pollution.
The car show will display the usual raft of high-horsepower luxury vehicles such as the Maserati Levante, Bugatti Chiron and the Lamborghini Centenario.
But this traditional recipe for success looks a bit out of step during a regulatory crackdown on vehicles with excessive levels of toxic emissions.
“This year a thick diesel cloud hangs over Geneva,” Ferdinand Dudenhoeffer, head of the CAR-Center Automotive Research said, noting that just over half of cars sold in Europe are powered by diesel engines.
VW’s admission in September that it cheated U.S. pollution tests has exposed how far behind Europe’s premium carmakers are when it comes to sales of hybrid and electric vehicles.
Figures compiled for Reuters by LMC Automotive show that German trio BMW, Mercedes-Benz and VW’s Audi - the world’s largest producers of luxury cars - rank only in 12th 14th and 22nd when it comes to annual sales of electric and hybrid vehicles, trailing leaders Toyota, Honda, Lexus and Nissan.
The Geneva Motor Show schedule includes no launches for pure electric cars by prominent brands apart from a new version of Daimler’s Smart car. Porsche, Audi and others are, however, working on new pure-battery luxury cars by 2019.
Carmakers have instead responded to a more frugal era by toning down some of their conventional offerings.
For example, Porsche’s 718 roadster, which replaces the Boxster, will be offered as a four cylinder car and Opel’s GT concept vehicle has a three-cylinder engine.
However, customers are increasingly opting for larger cars which tend to use more fuel, demonstrating a widening disparity between customer tastes and regulatory demands.
For the first time, European sales of sport utility vehicles (SUVs) overtook those of conventional cars last year, outselling the traditional subcompact and compact vehicle segments, according to analysts at JATO.
New smaller SUVs such as Audi’s Q2 and the Seat Ateca, both due to be displayed in Geneva, aim to capitalize on this trend.
Larger cars, though, require more expensive technology investments to meet tougher anti-pollution rules, at a time when analysts fear demand globally is starting to wane.
In a note titled “The end of an era”, Bernstein Research analysts said the outlook for the European industry had dimmed.
“Europe is a market where unfortunately the auto industry has little hope of making any money, as it is beset with overcapacity, very high structural costs, and is populated by too many automakers all offering technically sophisticated and expensive-to-build vehicles,” they wrote.
Reporting by Edward Taylor; Editing by Mark Potter