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Automakers Thinking Small In Size -- Not Ambition

Car manufacturers have decided to hone their products to cater for cost-conscious buyers.

GENEVA (AP) — Automakers are thinking small — in size, not ambition.

After years marked by environmental concerns, then the economic downturn and now European austerity measures, car manufacturers have honed their products to cater for cost-conscious buyers.

And it's not just compacts and SUVs that are getting smaller. Even premium automakers are downsizing.

At the Geneva Motor Show, which opens to the press on Tuesday, Audi will unveil a new A3, Mercedes-Benz its rejuvenated A-Class, and Volvo its V40.

"Buyers are increasingly looking to downsize and hunt for savings in terms of running costs and depreciation, while enjoying the status and quality of premium brands," said Tim Urquhart, analyst at IHS Automotive.

Urquhart said the trend could increase pressure on mass-market automakers like Fiat, Renault, PSA Peugeot-Citroen and General Motor's Adam Opel — which are being caught between both premium carmakers and value carmakers such as Volkswagen's Skoda and Korean manufacturers Kia and Hyundai.

General Motors and Peugeot last week announced an alliance they hope will improve their prospects in the difficult European market, which has registered four consecutive years of decline. GM will take a 7 percent stake in Peugeot, Europe's No. 2 automaker, in a deal that foresees a common platform by 2014 and synergies in the purchase of parts. The carmakers say it will save them $2 billion a year within five years, split roughly equally.

Peugeot is unveiling the new 208, a model that is especially important for a company heavily dependent on European sales. Peugeot has made the 208 both shorter and lighter than its predecessor, the Peugeot 207, a sign of where the auto industry is heading.

"The Peugeot 208 is both key to helping the French out of the crisis, while at the same time showing the potential to be a trendsetter," said Ferdinand Dudenhoeffer, director for the Center for Automotive Research at the University of Duisburg in Germany.

On the other side of the alliance, GM's Opel will be introducing its new Mokka compact SUV, entering the expanding segment of compact SUVs occupied in Europe by the Suzuki SX4 and the Fiat Sedici. Just 4.2 meters long, the Mokka is still classed as a five-seater.

IHS Automotive forecasts the compact SUV segment, which grew from 100,000 in sales in 2010 to 160,000 last year, will expand to 400,000 by 2014. Citroen, too, will be aiming for that market with its C4 Aircross.

Fiat will unveil the new 500L — a multipurpose version of its hot-selling remake of the iconic 500, now nearly five years old. The five-seater vehicle is on a slightly larger platform than the 500 and replaces the now phased-out Multipla.

The 500L is being produced at Fiat's factory in Kragujevac, Serbia, and will be introduced in Europe at the end of 2012.

Among higher-end brands, BMW's new 3-Series will be making its debut in Geneva, but is already proving a quick sell in European show rooms.

IHS automotive forecasts sales of the new model will rise to 420,000 vehicles in 2012, from 380,000 last year. New body styles such as the Gran Coupe and GT are expected to further increase sales to nearly 620,000 by 2014.

Among Germany's other big names, Audi will reveal the third generation of its A3 and the first new Audi C-Segment in nearly a decade. The A3 series, which accounts for some 20 percent of all Audi sales, will shift to a new modular architecture that will be used for most of the group's vehicles over the coming years.

Mercedes, meanwhile, is hoping to reach younger customers with its new A-class, a model often considered the preserve of the over-50s.

At past events, automakers showed off alternative power trains — mostly in the former of electric cars and hybrids. This year's Geneva Motor Show will see many of those early developments refined, like Mazda's i-ELOOP technology that uses capacitors to bring regenerative braking already found in electric vehicles to fuel-powered cars.

Dudenhoeffer says squeezing efficiency out of traditional gasoline- or diesel-powered combustion engines will be a focus of the show. That includes the Peugeot 107, the Citroen C1 and the updated Toyota Aygo.