Carmakers, stung by recession and unsure of their future as government support wanes, will put on a brave face at next week's Frankfurt Motor Show, promoting the green technologies they hope will be their salvation.
Analysts expect spirits to be a little higher than at last year's Paris show, with signs of recovery after a brutal slump, and General Motor's GM.UL decision to sell control of its European unit Opel to Magna (MGa.TO) providing some clarity after months of upheaval and uncertainty.
Even if all the problems are not solved, I think morale will be a bit higher, said Societe Generale analyst Philippe Barrier. Companies have adapted, they've cut production a lot -- perhaps we've passed the low point.
Renault (RENA.PA) and Nissan (7201.T) Chief Executive Carlos Ghosn said this week the financial crisis was over, and predicted the beginnings of a recovery in Europe from the end of 2010.
Government scrapping incentive schemes -- whereby drivers get cash bonuses to trade in old models for newer, greener cars -- have bolstered sales in major markets worldwide.
Positive signals in emerging markets are helping too with India reporting a seventh straight month of car sales growth in August. In the same month Russia, which had been tipped to overtake Germany as Europe's largest car market this year until the crisis hit, showed its smallest fall in four months, albeit a 54 percent drop.
People are hoping we're coming out of the crisis but everyone's still nervous and very much focused on the short-term, said Credit Suisse analyst Stuart Pearson.
Industry watchers will be on the lookout at the show for signs of further consolidation following the Opel deal, an agreement between China's BAIC and luxury carmaker Koenigsegg to buy GM unit Saab, and Geely Automotive's (0175.HK) bid for Ford's (F.N) Volvo.
My hope -- which I suspect will be dashed -- is that we see some announcement in terms of alliances. In terms of the amount of money being spent on technology, it makes sense for companies to work more closely together, said Nomura International analyst Michael Tyndall. He mentioned Daimler (DAIGn.DE) and Renault (RENA.PA) and BMW (BMWG.DE) and Peugeot (PEUP.PA) as two sets of likely candidates for closer ties.
But carmakers are worried about what will happen when the scrapping incentive schemes brought in to help flagging carmakers, which have inflated sales dramatically in some markets, come to an end. They want the schemes to be phased out gradually to avoid a second sales crash.
In Germany, Europe's biggest car market, where registrations leapt 28 percent in August, an incentive scheme that paid drivers 2,500 euros to scrap their old cars has now run out, whereas France has promised to keep its scheme running into 2011.
I still have grave concerns about what happens in 2010 - I think people have underestimated the impact of scrapping incentives on the natural level of demand, said Tyndall.
IHS Global Insight's Urquhart agreed, I think we're going to see a lot of pain moving into 2010 when they're finally withdrawn.
MAKING GREEN SEXY
Amid a reduced turnout at the show, with some major carmakers -- like Japan's Nissan (7201.T) absent altogether Opel's latest offering -- the new Astra -- will be one of the main draws among the cars being unveiled for the first time.
The big one is the new Opel Astra - with Opel in the state it's in, what it needs more than anything else is successful new cars, said Tyndall.
But as carmakers get ready to meet tough new targets to cut emissions from their fleets, the real stars of the show will be green technologies, Urquhart said. There'll be a big emphasis on electric cars and hybrids. France's Renault (RENA.PA) will show four new electric concept cars, while Hyundai Motor Co (005380.KS) will unveil its ix Metro hybrid concept car and its i10 electric car.
And carmakers -- like BMW, which will show its Vision concept for a hybrid supercar -- previously known for their sporty or premium credentials are trying to reposition themselves as green brands. I think making green sexy is going to be a big issue, Urquhart said.
(Reporting by Helen Massy-Beresford; Additional Reporting by Gilles Guillaume; Editing by Jon Loades-Carter)