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Fuel-efficient cars in fashion

Worldwide, car buyers and car makers are looking closely at ways to save some gas.

September 14, 2005; Posted: 3:30 p.m. EDT (1930 GMT)

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FRANKFURT (Reuters) - Near-record pump prices are spurring the global car industry to roll out smaller, more efficient cars that lighten the fuel burden for customers as expectations grow that high oil prices are here to stay.

Although not as directly affected by the increase as they are by high steel prices and volatile exchange rates, the industry invests billions to anticipate buyer demands and players such as Toyota Motor Corp. have struck a vein with fuel-saving hybrid gasoline-electric engines.

"In the United States people are getting more fuel conscious," Toyota President Katsuaki Watanabe told reporters at the Frankfurt auto show, citing dealer feedback from customers looking into small cars and large hybrid vehicles.

Watanabe said no one in the car industry -- not even Toyota with its line-up of small cars -- was happy with the level of oil prices, which could put economic growth at risk.

"What the car industry must do is to find viable solutions for these issues, which means the car industry must come up with fuel-efficient vehicles," the head of the world's number-two automaker said.

Rival Japanese carmaker Mitsubishi Motors has chosen to focus on the development of advanced lithium ion batteries that can already run 93 miles on a single charge.

"In terms of fuel prices and environmental issues I think all in all the need for smaller, lighter cars will increase," MMC President Osamu Masuko told Reuters.

German automotive companies, meanwhile, keep pushing improvements in diesel technology that combine high pressure direct injection with variable geometry turbochargers to help deliver 20 to 40 percent more fuel efficiency than gasoline motors.

BMW, VW's Audi, and DaimlerChrysler's Mercedes-Benz are showcasing three new V8 diesels featuring Honeywell's latest variable nozzle turbine (VNT) turbocharger that combines efficiency with an increase in performance, as all three deliver more than 300 horsepower.

"We invest a lot of money in the development of clean, efficient cars," Bernd Bohr, the head of Robert Bosch's automotive parts division, told Reuters.

As the cost of fuel rises, Bohr said, the additional investment involved in buying a more efficient diesel-powered car pays off more quickly.

According to the German auto industry association VDA, market-weighted fuel consumption by German passenger cars has rise to about 33.6 miles per gallon from about 29.4 mpg in 1996. It boasts that German carmakers lead the industry in reducing consumption.

Silver lining

The new technologies will be key in helping offset pump prices.

VDA estimates the dampening effects on disposable income from high fuel prices in Germany alone at 3.6 billion euros ($4.4 billion) in 2004 and roughly 4 billion euros ($4.9 billion) in the first eight months of this year.

In Europe, where gasoline taxes constitute the bulk of fuel costs, the problem has mushroomed into a hot political issue.

Days before a general election, German Chancellor Gerhard Schroeder condemned the oil industry for exploiting Hurricane Katrina for profit by raising prices. Two major oil producers cut gasoline and diesel prices after the French finance minister threatened to levy a windfall profit tax.

Industry analysts say the high fuel costs may have a silver lining by encouraging consumers to get rid of their old dinosaurs and trade in for a set of more fuel-efficient wheels.

"The recent strong rise in German car sales suggests that consumers are finally replacing their aged car park and the rising fuel prices certainly provide an incentive," Metzler Bank analyst Juergen Pieper said.

General Motors Europe President Carl-Peter Forster noted that motorists have reacted to high gasoline prices in the past by seeking powertrains that consume less fuel or alternative fuel.

"Normally you would see then perhaps a stronger shift to diesel or to slightly smaller engines, but not necessarily immediately to smaller vehicles," he told reporters.

Related stories:

Toyota: U.S. drivers feeling gas pains

Who needs hybrids?

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