By Helen Massy-Beresford and Christiaan Hetzner
LONDON/FRANKFURT (Reuters) - The global car industry descends on Frankfurt next week to show off the latest models it hopes will fend off an economic slowdown in some of its biggest markets, as government spending cuts chip away at consumer confidence in Europe.
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Car makers are also facing slowing growth in China, now the world's number one auto market, and a major driver of surging demand for luxury cars over the last two years.
Even if the United States avoids recession, competition will intensify there as Japanese auto makers battle to claw back ground lost when the March earthquake disrupted production.
Car registrations in some major European markets actually rose last month, but analysts are warning the numbers, which reflect cars bought up to two months ago, before the summer's stock market slump, do not tell the whole story.
"Certainly from a stock market point of view, a lot has changed during that time," said Barclays Capital analyst Michael Tyndall. "I take little comfort from good August numbers."
"It's been very aptly put that we have to be careful we don't talk ourselves into a recession," he said. "It's quite easy from a consumer perspective to get yourself to a point where you don't want to spend on anything -- it's all too uncertain," he added.
Tyndall's assessment of the vicious circle that could choke off demand is shared by luxury car maker BMW's <BMWG.DE> chief financial officer Friedrich Eichiner, who told reporters on Friday: "We don't want to bring about a crisis by talking about it, because we don't see one at the moment."
Eichiner said: "We believe we will have to cope with dampened growth in the future, but not necessarily with a new recession."
However, with the macroeconomic situation changing quickly, gloomy forecasts could weigh on demand.
Tyndall said: "We're looking at slower growth and in Europe we're looking at some retracement in 2012 but not anything like the collapse we saw in 2008."
But even if the car industry is expecting something far short of a crash, it will face up to the slowdown without the support from the government loans and generous scrappage schemes that saved the market last time round.
PricewaterhouseCoopers analysts see a "difficult" final quarter of 2011 in Europe that will drag the year as a whole into a 2.5 percent dip in the European car market to 13.4 million vehicles.
Josselin Chabert, an analyst at PwC's Autofact's unit said: "With the debt crisis, the lowering of economic forecasts and weak prospects for the job market, numerous European countries could experience a difficult next few months."
European car makers may have scrambled to increase their presence in China and other new regions but they still rely on Europe for the bulk of their sales and tough austerity measures threaten consumer spending power.
The Frankfurt show, which opens to the media on Sept 13, is traditionally a chance for premium German car makers to show off their new models.
Those brands in particular have been riding high, as newly affluent Chinese buyers have snapped up their plush models, but the smaller cars they are set to unveil next week should help them win a bigger slice of stagnating demand in Europe, where tightening emissions legislation favors small vehicles.
"It's a wide trend, especially for German car makers, shifting down-segment," said IHS Global Insight analyst Tim Urquhart, adding that the move also helped attract younger drivers.
"They can expand into the smaller segments and there's a whole new demographic that will be able to buy their vehicles."
Mercedes-Benz <DAIGn.DE> will take the wraps off its new B-class for the first time in Frankfurt, while BMW <BMWG.DE> will show its new 1 series compact.
Europe's largest car maker Volkswagen <VOWG_p.DE> will show its new small city car, the Up!, which it hopes will rival popular small models including Fiat's <FIA.MI> 500 and form a key part of its bid to be the world's largest car maker by 2018.
VW unit Audi will display an urban concept car powered by a lithium-ion battery and built around a carbon-fiber monocoque frame on its lavish 10 million euro stand which incorporates its own test track.
PwC said Germany itself remains a relative bright spot in Europe's gloom and predicted growth this year of 9.7 percent in that market, the region's biggest, after its economy held up better than some of its neighbors.
Ernst-Robert Nouvertne, owner of dealership Autohaus Nouvertn�� am Wasserturm in Solingen said orders had cooled off quickly since May after a strong start to the year.
"But we expect new models and premieres at the Frankfurt auto show to play a key role in giving a boost to new orders."
Juergen Karpinski, owner of Autoschmitt Frankfurt added: "New cars are in demand and waiting lists can be several months long. Nevertheless we expect an impact -- that always happens when the economy softens and hurts purchasing power, it just comes with a delay."
(Editing by Chris Wickham and Mike Nesbit)