Bumper year for car models but bad year for sales

Toyota Auris is on display during the second media day of the 77th Geneva car show at the Palexpo in Geneva March 7, 2007. Picture was taken using a long time exposure. Auto makers will show off a large number of new cars at theis year's Geneva Motor Show as they hope a product offensive can offset a weaker market in 2008, with consumers hesitant and governments taxing exhaust emissions.

GENEVA (Reuters) - Auto makers will show off a large number of new cars at the Geneva Motor Show as they hope a product offensive can offset a weaker market in 2008, with consumers hesitant and governments taxing exhaust emissions.

The European market is already set to decline and if economic growth slows, the sales drop may be bigger.

Add to that a strong euro stunting exports and high raw materials prices eating into margins and the mix is bleak.

"A 1 to 2 percent drop is our balanced view of the Western Europe market performance this year but of course should there be worse to come from the credit crunch, this does present a downside risk to the forecast," said Jonathon Poskitt of J.D. Power Automotive Forecasting.

The annual Geneva show, which will open to the media on Tuesday and to the public on Thursday, is the biggest such event in Europe and this year the organizers want to focus on green technologies such as hybrids and electric vehicles.

But the shows stoppers are likely to be the more muscular cars such as the third generation Volkswagen (VOWG.DE) Scirocco, a sport compact model that was a bestseller from its launch in 1974 until 1992, or the Nissan Motor Co (7201.T) GT-R sports car that pulled the crowds at the Tokyo Motor Show in October.

There will be several new sports utility vehicles, such as the Koleos from Renault (RENA.PA) and Ford's (F.N) Kuga 5-seat crossover model.

Fiat (FIA.MI) will revive its Albarth badge for a high-powered version of the Fiat 500 city car just as Renault rolls out a Clio and Twingo Sports version.

Nissan will take the Infinity luxury brand to Europe with the world debut of the FX model.

The overall car market is fragmenting into more and more niche segments and producers aim to get their product line-up ready before client attention shifts away.

So-called basic and small cars are set to do well, due to their relative cheap price and lower CO2 emissions amid government schemes to promote sales of relatively less polluting cars.

The world auto maker industry body OICA will hold a news conference on what the industry is doing to cut CO2 emissions and what they expect from governments in exchange.

Last year in Frankfurt, European car chiefs said they needed more time to implement the rules and that the new regulations would add to the price of cars and could jeopardize jobs.

SMALL CARS

Toyota Motor Corp (7203.T) will unveil the world premiere of a prototype small car, iQ, set for production in 2008.

J.D. Power said these cars now make up 36.5 percent of the western European market, up from 34 percent in 2005, and the portion is set to increase in part because carmakers can reduce their overall CO2 emissions -- and European Union penalties -- by selling more smaller cars in their product mix.

This has been at the expense of the upper medium segment but some recent new launches like the Renault Laguna and Citroen C5 could give this segment a boost, be it temporary.

European carmakers are increasingly pinning their hopes on emerging markets such as Brazil, Russia, India and China to increase overall car sales and restore profit margins.

That is not a one-way street. Several Chinese companies will be at the show, such as Brilliance or first-time exhibitor BYD.

The Swiss will also wave their flag with the firm Rinspeed that will showcase its sQuba submersible car with electric motors.

In the meantime, the industry needs to cope with a rise in prices of metals and energy, which it cannot pass on to clients.

"It's not acceptable for product prices to rise for our end users (car buyers)," Honda Motor Co (7267.T) CEO Takeo Fukui said last week.

(Additional reporting by Chang-Ran Kim, Gilles Castonguay, editing by Elizabeth Fullerton)