PARIS – All three French brands – Renault, Peugeot and Citroen – are abandoning the classic luxury-car segment as the market turns to smaller, fuel-sipping cars.

Renault SA will discontinue production of its Vel Satis this year, and the next Espace will move downscale to the Scenic platform. Peugeot has abandoned its plans for a 608 sedan and 807 minivan, and Citroen won’t follow its C6 sedan or C8 minivan, either.

As with the French luxury brands Delage, Delahaye and Hotchkiss that disappeared in 1954, various Concours d’Elegance around the world will carry the memory of classic Renault, Peugeot and Citroen luxury into the future but not the marketplace.

Volumes for French luxury cars have collapsed over the years, to the point where the current generations of the Vel Satis, Citroen C6 and Peugeot 607 have combined lifetime sales of only 250,000 units, according to consulting-firm Mavel SA.

However, the French auto makers will continue to search for margin improvements with luxurious smaller vehicles and specialty segments.

Renault even has plans to import a version of its Korean joint-venture SM5 marque to head its range of sedans and hatchbacks. Citroen plans to combat the Mini with the DS3. And with the 2011 City based on the Mini platform, BMW AG plans to battle Citroen’s DS4.

Even the standard C3 is being loaded with features to attract buyers moving down from larger segments who don’t want to lose their comfort levels while they search for better mileage. Both cars will get their public introduction at the Frankfurt auto show next week.

Lifetime Volume
French Luxury Cars
Model Units (in Millions)
Renault
R16 1965-1980 1.85
R20/30 1975-1984 0.78
R25 1984-1991 0.78
Safrane 1992-2000 0.31
Vel Satis 2001-2009 0.06
Peugeot
504 1968-1983 2.83
604 1975-1985 0.16
505 1979-1992 1.27
605 1989-1999 0.26
607 1999-2010? 0.17
Citroen
DS 1955-1975 1.45
CX 1974-1991 1.03
XM 1989-2000 0.33
C6 2006-? 0.02

Peugeot Automobiles enters a new segment at Frankfurt with the launch of the RCZ, a sporty 2+2 along the lines of the Audi TT.

Powered by 153-hp and 200-hp gasoline engines developed with BMW, or its own 163-hp diesel, it promises the acceleration to match its aggressive design. Aimed at sales next spring, Peugeot hopes for a volume of 20,000 units annually.

Renault in August 2008 began selling a version of the Korean SM5 as a Renault Safrane in the Middle East, offered with I-4 and V-6 engines and automatic transmissions.

That SM5 model is based on the platform Nissan Motor Co. Ltd. uses for its Teana in Japan and the Maxima in the U.S. In Europe, the Korean-made car essentially will replace the Renault Laguna and Vel Satis.

Outside Europe, Renault also has the Fluence, the 4-door sedan version of the Megane being marketed as halfway between the C-segment of compact family cars and the segment immediately above.

French luxury cars haven’t really sold anywhere but France, “and you can’t make a volume car with that,” says Bertrand Gay, publisher of AutoStratInternational newsletter. “I think today you can have an image car that is something other than a luxury car, such as an electric car, or a hybrid as Toyota has done.”

Renault is pushing hard to become the new leader in electric cars, with an EV version of the Fluence coming to Denmark and Israel in 2011.

PSA hopes to be the world leader in diesel hybrids with its ’11 Peugeot 3008 Hybrid4 and Citroen DS5 Hybrid4, as well as the hybrid version of the RCZ that will be shown at Frankfurt and a ’12 plug-in hybrid.