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An article posted on BoingBoing features an interview with John Pojman, a chemistry professor at Louisiana State University. When asked what causes that lovely "new car smell," Pojman said it has to do with PVC (polyvinyl chloride) plastic and plasticizer.
Plasticizers is what produces the smell, and they're used to soften PVC.
Th article stated: At a molecular level, PVC is a dense thing. Imagine a slinky in its stiff, compressed state. The plasticizers are chemical compounds derived from coal tar. Mix them with PVC and the small molecules of plasticizer shove their in between the densely packed PVC molecules. Imagine stretching the slinky out so that its coils are now wobbly. Same thing happens here. The more plasticizer you add, the less rigid the PVC.