Frankfurt Preview - Two cheers from European manufacturers

The German hosts of the Frankfurt Motor Show are feeling even more self-confident than usual right now.

At the time of the last Frankfurt show in 2009 (it takes place every two years, alternating with the Paris show), the German industry would not have dreamed of making so much money in 2011.

Audi, BMW and Mercedes have spent the last 18 months revising their profit forecasts upwards as the demand for premium vehicles worldwide has soared.

Even Jaguar Land Rover (JLR) reported profits of £1 billion last year, having been making losses until 2008.

Indeed, JLR took a perverse pride in a vicious hatchet job on the Evoque by a German publication recently. It showed the German car industry now views JLR as a genuine rival, rather than an object of condescension – the German car industry and its media have a rather closer relationship than would be considered normal in the UK.

Amongst the mainstream European car makers, life has been relatively good this year. Vauxhall (Opel in the rest of Europe) says it is heading towards profitability, Ford says it is making money in Europe, while VW is racing ahead, buoyed by surging demand in China.

Of course, not everyone can be a winner. Fiat will be launching the new Panda at Frankfurt, which absolutely must be a big success. Fiat market share has been dwindling over the last couple of years as it has not introduced a major new model since the 500 in 2009. What it really needs are replacements for the ageing Punto and prehistoric Bravo.

Meanwhile, Renault is in the middle of a big re-organisation after its Chief Operating Officer resigned over the spying scandal that wasn't ( a greedy employee persuaded Renault that some of its top managers were selling secrets to competitors and took a lot of "expenses" to investigate a non-existent case).

If the Frankfurt show had happened six months ago, you would have heard the mutual backslapping here in the UK. However, the industry is worried again for the future. The European debt crisis is seriously scary for European manufacturers, who are concerned about how consumers will afford new cars if things go bad.

The Greek car market has vapourised, but it was always too small to matter. However, the idea of Italy, which accounts for around 2 million sales a year, going the same way is enough to keep car bosses awake at night. Everyone talks about China as the world's great car market, but Europe still accounts for 13 million cars, even in a bad year.

Additionally, if Europe goes into a serious recession, it will harm even China. China makes its money by exporting to us, and if we can't afford to buy from them, their economy suffers too.

The car market is like a game of snakes and ladders, but snakes seem to be a lot more common right now than ladders.
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