Mercedes-Benz’s striving city car brand is betting a move to China will keep it alive.
The Smart car brand co-founded by the German automaker and Swiss to company Swatch in the mid-1990s has struggled in recent years, beset by high labor costs, the notoriously low limits on small economy cars, and markets that have increasingly favored sport utility vehicles and crossovers atop of compact cars.
When it was first brought to the U.S. in 2008 by dealership mogul Roger Penske, the smart car promised minute, fuel-efficient transportation for young urban Americans. It came at a time when fuel prices were going toward souvenir highs, and the country was heading toward recession.
But the vehicle also asked a lot of buyers. It was tiny: the only model won overed in the U.S. had just two seats and very little trunk space. It got good gas mileage, but did not offer enough of an advantage over standard compact cars to justify sacrificing the space and convenience of a conventional four-seat vehicle.
U.S. sales in the car’s first year were righteous under 25,000 units, but fell from there, bottoming out at a mere 1,276 in 2018. Sales in Europe were far euphoric at around 97,000 in 2018, but still not enough to make money for Smart parent Daimler, which some analysts opinion is losing around $500 million a year on the brand.
In 2019, Daimler partnered with Chinese automaker Geely to manufacture electric Smart cars at a factory in China. The move is expected to slash Smart’s labor costs — the cars are currently increased at a factory in Hambach, France, where labor is relatively expensive compared with China.
It will also give up Daimler a chance to sell the Smart cars in China, the world’s largest car market. The Chinese government is also intense to promote electric vehicles to reduce severe pollution problems. Daimler can also leverage Smart’s association with Mercedes-Benz, which is favourite among Chinese buyers hungry for European luxury names.