Car makers, 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 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 and Nissan 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 car maker Koenigsegg to buy GM unit Saab, and Geely Automotive's bid for Ford's 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 and Renault and BMW and Peugeot as two sets of likely candidates for closer ties.
But car makers are worried about what will happen when the scrapping incentive schemes brought in to help flagging car makers, 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 car makers -- like Japan's Nissan 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.
