NEW YORK (FORTUNE) - When the New York auto show opens to the public on Friday, teenage boys and their fathers will be found clustered around the (BMW.F)stand admiring its two latest models: a pair of hard-top coupe versions of its popular Z4 sports cars.

The cars are the latest iteration of a strategy that BMW has been vigorously pursuing for a decade or more: creating appealing niche products that exemplify the driving characteristics of the BMW brand.

By not straying from its core values, BMW has enjoyed nearly a decade of growth and ranks, along with Toyota (Research), as the industry's most consistent performer.

In an interview at the show, BMW Chairman Helmut Panke, who has run the company since 2002, explained how it works, talked about some future designs, and disclosed details about BMW's first hydrogen-powered production car.

Q: Why has BMW done so well for so long?

A: "BMW has had two stumbling blocks, one in the late 1950s when we were basically illiquid and the then-management tried to sell the company to (DCX.BA).

The other stumbling block was the Rover acquisition in the late 1990s that did not create a product portfolio where you had dynamic cars with strong brands.

We separated from Rover in 2000 and the entire company refocused on what makes BMW an original, dynamic, performance-oriented car and organization. And this is something that goes beyond the product.

The fact that we always have to be faster than what customers today expect makes us fast, too. Toyota has the most standardized and efficient way to develop, manufacture, and market [lots of] cars.

We take the opposite approach: Everything is focused on the individual customer. Their Lexus division only offers four colors while we offer 15 or 16 colors. You can change the specs of the car that you have ordered until six or seven days before the beginning of production.

Q: What model segments will produce the most future growth?

A: When you look at total volume, the traditional sedan will continue to be the largest segment in every market across the globe. On the other hand, there is every evidence that the classic one-dimensional concept like the minivan and the boxy SUV are all disappearing.

The first sign of that is the twin-cab pickup. It isn't simply a pickup anymore, it isn't an SUV, it is a new combination that can provide a multitude of different uses. You don't just take it off-road, maybe you want to take your kids and some friends to a sporting activity and carry all that gear.

Consumers are getting a little bit tired of boxy, very practical designs. There is going to be a shift in the overall trend in the market with crossovers between cars, off-roaders, and multi-purpose vehicles like minivans. We will have new definitions of vehicle concepts that will take some of the aspects of traditional vehicles and avoid some of the negatives.

Q: What are your plans for hydrogen?

A: Within the next 18 months, BMW will offer a 7-series which will be a bi-fuel car: it will drive on hydrogen fuel and as a backup we will have a gasoline tank. The limited number of hydrogen fuel stations make it impractical to rely solely on hydrogen. I have test-driven our car that is coming to market. The changeover from hydrogen to gas is just a push of a button.

Everybody expects gasoline to get to $3 per gallon here in the U.S. this summer and that will certainly increase interest in lower fuel consumption and fewer emissions, because in the end this is the responsibility of the auto manufacturers.

In the long run, hydrogen is going to be with us. Beyond hybrids, which are an add-on concept that will hopefully have more positives than negatives, Europeans focus on diesels. But if the consumer doesn't want diesel, we should not try to educate him.

That's why we are also pushing more efficient gasoline engines. Our latest generation in-line six cylinder has about a ten to 15 percent lower fuel consumption and lower emissions than the previous generation."

Panke turns 60 in August and his BMW contract expires in May 2007. But don't be surprised if there is announcement very soon by BMW's supervisory board saying that he has agreed to remain as chairman for another three years.