European Automakers Hope Technology Can Lure Younger Buyers

With sales at their lowest level in two decades, auto industry managers gathering for the Frankfurt auto show next week will be doing their best to focus on shiny new technologies rather than on the European car market, which, in contrast to the thriving market in the United States, is in a terrible state.

The buzz at the show, which opens to the public on Wednesday, is likely to be about new battery-powered cars and vehicles that are able to drive themselves. Those are more cheerful topics than auto sales, which have fallen 20 percent in Western Europe since the financial crisis began in 2008 and are at their lowest level since 1993.

Only European carmakers with substantial sales in the United States or China — BMW, Mercedes and Volkswagen — have escaped relatively unscathed.

The emphasis on technology is more than just a distraction from market misery. Carmakers are desperate for ways to excite young buyers, who are increasingly apathetic about car ownership. The push toward cars that are rechargeable and loaded with software is part of a search to make automobiles as essential to young adults as smartphones. Otherwise, there is a big risk that auto sales may never reach their previous peaks even if the European economy keeps improving.

“There are products that are hipper for young people than cars,” said Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen in northern Germany and an industry analyst. “The car companies are still using the old marketing pitch — more horsepower. That doesn’t speak to young people any more.”

Interest in battery-powered cars has faded after disappointing initial sales, but it could pick up again this year with the market introduction of the BMW i3. The vehicle has perhaps the most revolutionary new design by an established carmaker in years, not only because of its electric propulsion system but also because the passenger compartment is made of carbon fiber rather than steel, to save weight and extend the distance the car can travel between charges.

There is also speculation that Continental, a German parts supplier, will announce an alliance with Google next week to further develop self-driving cars. A spokesman for Continental, which will hold a news conference at the auto show on Tuesday, declined to comment.

As such initiatives illustrate, it is no longer enough for a car to take a person from one place to another without breaking down. A car must be green, so the owner does not feel guilty driving it. And being in the car should not interrupt the perpetual connectivity that many younger people take for granted.

BMW is going to extremes to make the i3 the most carbon-neutral car on the road. A wind turbine outside the BMW factory in Leipzig provides power for the i3 assembly line, and the carbon fiber for the passenger compartment comes from a factory in Washington State that uses hydropower. And of course the i3 itself has no tailpipe emissions (unless buyers choose a range-extender version that has a small gasoline motor).

With a price of about $42,000 in the United States, the i3 will be an option only for higher-end buyers when it arrives in showrooms by the middle of next year, though government incentives could lower the price by more than $7,000. But since BMW’s clientele already tends to be wealthy and urban, the company may be in a better position than other carmakers to find a market.

“What the mobile phone did for communication, electric mobility will do for individual mobility,” Norbert Reithofer, the chief executive of BMW, said during an introduction event for the i3 in New York in July.

Despite Mr. Reithofer’s enthusiasm, no one expects battery-powered cars to sell in large numbers soon, and certainly not to solve the industry’s deep-seated problems. About 77,000 electric vehicles were sold in the United States in the last 12 months, far more than in any other country, according to Roland Berger Strategy Consultants in Munich. That number, which includes cars like the Chevy Volt that have range-extender motors, is tiny compared with the 14.5 million cars of all types sold in the United States last year.

Modest expectations may also be in order for self-driving cars. Cars are coming on the market that can relieve drivers of some of the tedium of driving in traffic or on the highway. The latest edition of the Mercedes-Benz S-Class, introduced this year, can steer and brake autonomously in traffic or on the autobahn.

Automakers Build Showroom in an App

“They won’t come into the stores to educate themselves,” said Peter Chung, general manager of Magic Toyota and Scion in Edmonds, Wash. “They’ll do that online.”

More than half of the younger buyers surveyed by AutoTrader.com, a car-buying site, said they wanted to avoid interacting with dealership sales representatives.

In response, automakers like Cadillac and Toyota are starting to embrace technology that tries to take the showroom to the buyer. Known as augmented reality, it embeds images and videos in a picture on the user’s smartphone or tablet. The result is a far more detailed view of the image, often in three dimensions with added layers of information.

For example, when Cadillac introduced the ATS last year, it created a campaign in cities across the country that allowed observers to point an iPad at a chalk mural and watch the car drive through scenes like China’s mountainous Guoliang Tunnel and Monaco’s Grand Prix circuit. The goal was to grab the attention of potential buyers, especially younger ones, who would not normally think of Cadillac when researching new cars.

Later, Cadillac added the technology to its print advertising, pointing readers to download the brand’s smartphone application to view a three-dimensional model of the car. The app allows users to zoom in on the car and turn it 360 degrees by swiping their finger across the screen.

“It’s obviously different than going to a dealership, but at least it’s enough to engage with the vehicle in an environment where they’re comfortable,” said Arianna Kughn, Cadillac’s social media manager.

Audi has used the technology in its brochures and instruction manuals, while Toyota added it to a campaign with the computer-generated pop star Hatsune Miku to interest a younger audience in its 2012 Corolla and to increase the number of downloads of the automaker’s shopping app.

Other businesses are seeing an opportunity as well. Metaio, a German software company with an office in San Francisco, has worked on projects for Audi, Volkswagen and Toyota.

Specular Theory, based here in Venice Beach, is using Hollywood production techniques to create renderings that allow users to open the doors of a car that is not really there, peer inside and walk around, or take a test drive, merely by running their fingers over a phone or tablet screen.

Its founder, Morris May, is applying the expertise he developed over 20 years as a graphic designer on movies like “Star Wars: Attack of the Clones” and “Spider-Man 2” to redefine the way people view cars in the showroom, online and through mobile devices.

“We’re changing the way people experience cars,” Mr. May said, as he used his finger to open the car door of the virtual model displayed on his iPad, revealing the interior of the car, including the dashboard, steering wheel and texture of the seats.

The technology offers cost savings to automakers as well. Traditionally, automakers spend millions of dollars when marketing a new model, on photo shoots or building a “cookie-cutter configurator” that changes the car’s colors or features on a Web site, Mr. May says.

When a new model is introduced, that work is scrapped, and the production team, which includes photographers, Web developers and media buyers, starts anew.

As an alternative, Specular Theory uses an automaker’s computer-aided design data to create material that is consistent across Web browsers, phone and tablet screens and showroom floors, where dealers can project and modify life-size, three-dimensional car models.

When an automaker makes a minor change to, say, the tailpipe of next year’s model, Specular Theory can eliminate the time and money spent creating a new campaign by tweaking data from the marketing materials.

Mr. May’s model uses the weight of the car and the tension of the springs to calculate how it drives, controlling the car with a joystick.

Specular Theory, which started six months ago, is still in its infancy but has landed Autodesk, which makes three-dimensional design software for a variety of industries, as a client.

Chinese Automakers Quietly Build a Detroit Presence

DETROIT — Dozens of companies from China are putting down roots in Detroit, part of the country’s steady push into the American auto industry.

Chinese-owned companies are investing in American businesses and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores, and hiring experienced engineers and designers in an effort to soak up the talent and expertise of domestic automakers and their suppliers.

While starting with batteries and auto parts, the spread of Chinese business is expected to result eventually in the sale of Chinese cars in the United States.

“The Chinese are well behind the Japanese when they hit our shores 30 years ago,” said David E. Cole, a founder of the Center for Automotive Research in Ann Arbor, Mich. “They lack the know-how, and they’re coming here to get it.”

As businesses sprout up with little fanfare, Chinese companies seem to be trying to avoid the type of public opposition experienced by the Japanese automakers Toyota and Honda in the 1980s, when the sudden influx of foreign cars competing head-on with cars from General Motors, Ford and Chrysler was perceived as a threat to American jobs.

In contrast to the Japanese, Chinese auto companies are assiduously avoiding the spotlight. Last year, the biggest carmaker in China, Shanghai Automotive Industries, opened new offices in suburban Detroit without any publicity, which is almost unheard-of in an industry that thrives on media coverage.

But China’s growth in the American auto industry is drawing notice in Washington. Last year, the Obama administration filed a complaint with the World Trade Organization that China’s government was unfairly subsidizing the production of some parts shipped to America. And the country’s inroads into American-made batteries and electric vehicles have drawn scrutiny because that sector of the industry has been heavily subsidized by the United States government.

The American industry’s overall resurgence has drawn a growing Chinese population to Detroit, with Chinese-owned suppliers bringing executives from their country and American automakers adding new talent. About 50,000 Chinese, many of them engineers and other professionals who work at General Motors and the Ford Motor Company, live in the metropolitan area.

Business networks are growing too. The Detroit Chinese Business Association boasts a flourishing membership, and counts about 100 Chinese-owned businesses, mostly auto-related, in the region.

The Ford Chinese Association, with 650 white-collar workers, predominantly from mainland China, has become one of the largest employee groups at the company. Its president, Raymond Xu, recalled that in 1999, when he came to Detroit to attend college, there were very few Chinese in the area.

“I think people are going to get more and more comfortable with it,” Mr. Xu said.

Typical of the Chinese expansion are the nondescript offices of Changan Automotive in an industrial park in the suburban city of Plymouth. Changan, a major carmaker in China, set up a research center to better understand the structural chassis of a vehicle — then hired about 20 Detroit engineers, some of whom had been laid off from Detroit’s auto companies, to staff the project.

“Most of the engineers are very young in China,” said Hong Su, the Changan executive heading the American facility. “They know how to make vehicles, but they don’t know how to develop them.”One of his employees is Alan Wall, 54, a former contract engineer at Chrysler who lost his job during the recession.

“It was an opportunity,” he said. “And those tend to come from a company that is trying to expand.”

Last year, China exported about $13 billion in automotive goods to the United States — tires, wheels and radios that are sold as replacement parts — according to AlixPartners, a consulting firm.

But many Chinese suppliers are pursuing direct business with the Detroit car companies, which now get many of their most common parts from low-wage nations like Mexico. One supplier, Brilliance Auto, an industrial giant with about 500,000 employees in the city of Shenyang in northeast China, is still an underdog in Detroit, trying to crack an intricate network of suppliers that have long relationships with G.M. and the other carmakers.

“We have been exporting our parts to North America for 15 years for the aftermarket,” said Dongbin Chen, a Brilliance executive, referring to retail sales of replacement parts. “Now our biggest opportunity is with G.M. and the other big companies.”

Brilliance scored a coup last year by supplying lightweight engine mounts for the new Cadillac ATS sedan made by G.M. in Lansing, Mich., which has whetted the company’s appetite for more.

At a United States-China conference held here in November, Brilliance displayed a large exhibit showcasing a range of mundane parts — including seat belts, steering wheels and shock absorbers — that it hopes to export to America.

“We have the ability and the capacity to supply these kinds of parts,” Mr. Chen said. “And I think right now, it is very important for us to be here.”

Foreign Automakers See Potential in Russian Market

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European Automakers Face a Stunted Future

But even if there is a slight recovery in 2013, as some predict, it is dawning on industry executives that it could be years before sales return to the levels of 2007, when they peaked just before the financial crisis.

New passenger car registrations in the European Union have declined every year since then and are down 7 percent this year so far this year. The inescapable conclusion, some executives say, is that the industry is not going through a downturn but is changing permanently, and car companies must adapt more quickly.

“In the near future, it will be impossible to come back to the numbers of the early 2000s,” Luca Cordero di Montezemolo, the chairman of Ferrari and a member of the board of the Italian carmaker Fiat, said in an interview Thursday. “Every single carmaker will have to take care of this.”

The new-model introductions in Paris reflected the state of the market. They seemed to be aimed either at rich people who still have money or at the masses trying to make do on less and less at the middle of the market. At the high end, Jaguar is offering its first two-seat sports car since the 1970s, the all-aluminum F Series, which will go on sale in the United States and the rest of the world next summer, starting at about $70,000.

Toward the low end was Renault’s new Clio and the Adam from the Opel unit of General Motors, both attempts to offer a measure of style on a budget.

But even if those new models turn out to be hits, auto companies must still radically cut costs — a process that has only begun. Sergio Marchionne, the chief executive of both Fiat and Chrysler, said that factories in Italy were operating at 50 percent capacity, well below the level analysts say is needed to be profitable.

Mr. Marchionne, trying to counter the image of auto executives as heartless job cutters, said he laid awake at night worrying about Fiat employees whose jobs are in danger.

“We all understand that a lot of livelihoods depend on the decisions we make,” he said at a news conference.

Mr. Marchionne repeated calls for European Union leaders to negotiate cuts in manufacturing to spread the pain throughout the region, as they did for the steel industry in the 1990s. Mr. Marchionne said political leaders were in favor of closing plants only outside their own countries.

“This is something that has festered for a number of years,” Mr. Marchionne said. “If this issue had been handled in a coordinated way long before, it would be a lot less of a problem than it is now.”

Among auto executives there is increasingly open frustration at political leaders who they think have dithered in finding a solution to the euro zone debt crisis, while at the same time obstructing attempts by manufacturers to cut costs.

“We have to deal with overcapacity; politicians need to understand this,” said Wolfgang G. Schneider, vice president for governmental, environmental and legal affairs at Ford of Europe.

At the same time, leaders must do more to restore confidence in stricken countries, Mr. Schneider said. Ford is selling fewer cars in Spain than it is in Turkey because Spanish consumers are fearful of the future and unwilling to make large purchases.

“Things are going in the right direction, but not fast enough,” he said of measures to stabilize the euro zone.

Among the mass market carmakers, Volkswagen remains an exception. “Despite all the headwinds, we are sticking to our ambitious goals for 2012,” Martin Winterkorn, the chief executive, said at a company event Wednesday evening.

Volkswagen, the largest automaker in Europe by far, has benefited from its strength in Germany, which has escaped the worst of the crisis, as well as its strong presence in fast-growing emerging markets like China and Brazil.

Still, the company seemed at pains not to show any satisfaction at the woes of its competitors. There was some of the usual over-the-top spectacle at the event Wednesday evening, like dancers twirling in vinyl ballet dresses, their faces covered by plastic visors. VW showed a design for a new version of the Panamera, made by its Porsche unit, that is a kind of high-performance luxury station wagon.

In addition, Volkswagen introduced the latest version of its best-selling Golf, an exception to the trend of cars aimed at the high or low ends.

But Volkswagen also devoted significant time to its efforts to promote youth employment in troubled European countries, bringing two young trainees from Spain and Portugal on stage to speak about how happy they were to have jobs at Volkswagen.

“We’re doing everything we can to ensure that Europe has a future as a place to manufacture,” Mr. Winterkorn said.

Despite the dismal outlook for Europe, auto executives said they remained optimistic about the car industry globally. Sales continue to rise in countries like Brazil and Russia, offsetting Europe to some extent. The companies suffering the most are Opel and PSA Peugeot Citröen, because they remain heavily dependent on Europe.

“When you look at the sector on a worldwide basis, it’s not decreasing,” said Jérôme Stoll, executive vice president for sales and marketing at Renault. Still, foreign markets are not yet doing enough to compensate for slowness in Europe, which will not recover before the end of the decade, he said.

Renault does not plan to close any plants in France, Mr. Stoll said, but he pleaded for legislation that would make it easier to adjust capacity — for example, by transferring workers to other plants. “We need to be as flexible as possible,” he said.

Even Ferrari has felt the crisis, though its overall sales have continued to rise. Sales in Italy have plunged, in part because buyers may fear that driving an expensive sports car makes them a target for tax inspectors.

Ferrari has continued to do well globally because of investments it began making years ago to expand its lineup and sell to newly wealthy buyers in Asia, Mr. Montezemolo said. China has become Ferrari’s third-largest market, behind Germany and the United States.

“Thanks to innovation, new products and worldwide presence,” he said, “thank God we are not suffering.”