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In Europe, I am gob smacked by the surrealism of it all.

The headlines all talk of something approaching the end of the world: perhaps a war with Russia or imminent economic collapse or Gwyneth Paltrow suffering another conscious uncoupling. Yet the sidewalk cafes of Paris are overflowing every night, heaving with conversations engulfed in clouds of cigarette smoke. Expensive cars fill the streets. No one appears to be suffering in any way.

And the Mondial de I'Automobile 2014 – the Paris motor show – is overflowing with new models and automotive news and newsmakers.

The facts say Europe is on the precipice of a recession, but there are no signs of it on the streets or in the halls of the show. As the latest economic quarter ended, timed almost perfectly with the opening of the exhibition, the euro was at its lowest since September 2012, yet the Place de la Concorde is teeming with traffic. Car sales seem healthy enough.

The papers say the stock market in Europe is in a shambles and the European economy is close to a Japan-like deflationary cycle. Russian president Vladimir Putin is called a scary problem in numerous headlines, yet no one in Paris looked worried and there are no homeless in sight. When I arrived in Paris, Air France pilots were on strike. Of course. There is always a strike in Paris during normal times, so these must be them.

Or perhaps not. The stories that unfolded at the show suggest a car business that is focused on creating products for buyers who are nervous about the future and for governments who covet the economic benefits of a healthy industry while demanding socially responsible vehicles. Into that, throw the auto industry's response to the expanding ranks of the super rich.

Thus, in Paris we had the juxtaposition of Toyota announcing the European launch of its fuel cell car next year within minutes of Bentley giving details about the ultra-luxurious and fast Mulsanne Speed. Somewhere, perhaps in the middle, we had Lamborghini unveiling the 910-horsepower plug-in hybrid Asterion – beautiful, fast and fuel-conscious all in one.

And not alone. It was surreal to see so many European car companies embrace hybrids and plug-ins in Paris. For more than a decade, a trip to the Paris or Frankfurt or Geneva auto shows would include European car company executives mocking Toyota's commitment to hybrids. No longer.

Governments in Europe are toughening CO2 emissions limits, and to meet them, the car companies are turning to hybrid power trains. Luxury brands such as Lamborghini and Porsche, with its Cayenne plug-in introduced here, and Infiniti, with its Q80 Inspiration hybrid concept, are committed – but so are mass market brands such as Volkswagen.

Speaking of which, VW showed its new Passat GTE with a plug-in hybrid power train and it's impressive: 1.4-litre direct injection gas turbo paired with a 115 kW electric motor for a 50-km range on batteries alone. The car will hit showrooms in a year, joining the Golf GTE plug-in.

Not that many years ago, VW CEO Martin Winterkorn scoffed at hybrids and plug-in hybrids, at least publicly. Now he's leading a car company hurtling itself into the development of electrified cars with all the zeal of the most ardent early adopter. The reality is that VW's long-standing public solution for giving consumers affordable fuel economy can no longer be diesels. VW and its rivals cannot economically meet the latest and coming emissions rules.

So analysts and car company leaders see a steady decline for sales of diesels here in Europe – diesels that have commanded half of the new-vehicle market for decades. We are heading into the age of the hybrid and the plug-in hybrid. That realization in Paris was without question, surreal.

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