gizemakkan
Parallelism still didn't make sense for me and stuck in C, please explain in more detail
This is a great example of how much meaning matters in these problems, and of why "parallelism" exists as a principle in order to protect meaning.
Think about what is making a passenger think the car is on fire. Is it the air bag inflating? Is it the safer air bag? Or is it the burst of smoke? Logically it's the burst of smoke, right? An inflating balloon doesn't make anyone think "fire!" nor does a new air bag (which you don't see unless you carve open your steering wheel). So the sentence has to be structured to make it clear that it's the burst of smoke that made people think there was a fire. There are several subject-verb combinations nearby the verb "to make" from the answer choices, but we want the action to be parallel to "a burst of smoke would appear":
"a burst of smoke would appear and (would) make an already terrified passenger think the car was on fire"
Putting "(would) make" parallel to "would appear" clearly connects the verb to the subject "burst of smoke."
Note that other choices put the verb parallel to others, which would then connect them to other nouns. You can't say "would made," so choice C just mis-assigns the verb to another noun:
"...when the air bag inflated and made an already terrified passenger think the car was on fire" (but it's not the bag inflating that creates that fear of fire)
"A new air bag eliminated...and made an already terrified passenger think..." could be another read on "made" but that doesn't make any sense either.
Note that while you can call this parallelism, I think you can also argue that it's just a verb tense problem. Once it's clear that it's the smoke that "would appear and (would) make the driver think the car was on fire" you have to use a verb tense that works with "would" and "make" is the only possibility here.