Carmakers upbeat at Frankfurt as market steadies (Update 2)

The world's auto manufacturers are moving on from turbulent times—without help from Europe's lagging car markets.

Recovering auto sales in the United States and continuing strength in China have helped lighten the mood at this year's Frankfurt Auto Show, where automakers have set out to wow potential customers with electric and hybrid-drive vehicles and the latest technology.

Latest sales figures show the key U.S. market on pace for 16 million in sales this year, finally reaching the 2007 level from before the financial crisis and recession.

But the only good news out of the show's home market, Europe, is that sales appear to be halting their steep decline. Executives and analysts say no significant rebound is expected this year or next.

"We're pretty confident that the slope is ending. We're not sure that the recovery is here," Renault-Nissan CEO Carlos Ghosn said about the European market, adding that he anticipated some very small growth—between 1 and 2 percent—for the next few years.

Renault and other mass market carmakers have especially struggled during Europe's decline, but Ghosn said they were buoyed by emerging markets and would continue to be.

Last year, new car registrations in the European Union were at their lowest level since 1995 at around 12 million cars, compared to 15.6 million in in 2007. The Center for Automotive Research at the University of Essen-Duisburg estimates only 11.8 milion this year, and a very slight recovery in 2014.

"In the car industry, we have two worlds, on the one hand Europe which is a catastrophe, and the rest of the world where it looks much better," said Ferdinand Dudenhoeffer, professor of automotive economics at the university.

Germany's Daimler, Volkswagen and BMW are all making money thanks to sales outside Europe and are showing off new products with swagger and glitz at their home show.

Major themes at Frankfurt include electric and hybrid autos, often in higher performance and price categories, and new small SUVs, an increasingly popular category in Europe. Another frequent topic is autonomous driving—still a long way off due to legal and technical reasons but increasingly possible by equipping cars with cameras and computers.

At BMW's gigantic hall, its new i3 electric compacts glided silently around an elevated figure-eight track. The chief executive of crosstown rival Daimler, Dieter Zetsche, showed off his Mercedes brand's self-drive technology by riding into another exhibit hall in the back seat of a driverless car.

The car had made an autonomous cruise through several German towns to show off the new systems. Drivers who buy the new Mercedes S-Class will find that it forces them to put their hands back on the wheel after a few seconds. The company also unveiled a hybrid version of the S-Class, the luxury sedan.

Volkswagen showed off four new cars using electric propulsion: electric versions of its Up! and Golf compacts, and an Audi A3 and Porsche Panamera using hybrid drive, which combines electric motors and internal combustion engine to reduce emissions.

One target of the show's marketing effort is western Europe's young people, many of whom have turned away from their parents' SUV's toward a mix of bicycles, car-sharing and public transport.

BMW opened the first press day Tuesday with a song shouting "we are young" and a presentation including footage of people tearing down the Berlin Wall.

With hybrids and electrics only 0.2 percent of the market, analysts say that the prospects for sales and profits remain uncertain. They can help companies meet government requirements for lower average emissions—and position them to be ready if such vehicles take off.

Zetsche of Mercedes added that the only way to perfect the technology is to actually make cars on an industrial scale and sell them.

"We don't expect that this will have any kind of explosive development," Zetsche told reporters. "But we will see a long phase of steady, slow substitution of conventional power trends by alternative ones."

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