We had to find a smart solution for Smart. After twenty years of nagging efforts, Daimler could not decently write off its mini-city cars. Rather than bury his dream for good, the German group has decided to attempt an umpteenth relaunch with Chinese Geely. New models, new markets, new factory, new partner. “This is the beginning of a new chapter for Smart,” writes Dieter Zetsche, the big boss of the Stuttgart manufacturer.
From 2022, Smart will no longer be assembled in Hambach in Moselle but in Guangzou in China at a plant to be built by a new Daimler-Geely joint venture. It will also be responsible for designing the gear (the Germans will design, the Chinese development). “It’s the right partner for us,” says the German leader, who saw the stirring Li Shufu, the founder of the Chinese private builder , land without being invited to its capital last year. “We really respect the value of Smart. The brand has a unique attractiveness and a strong commercial value, “says the latter.
A priori, it seems a good deal for Daimler. Geely is a global specialist in the electric car – knowing that all Smart will soon be lithium ion. Incidentally, the duo has already set up another joint venture, this time dedicated to mobility services in China. An initiative that should not fail to raise questions on the part of BMW, who has merged his mobility activities with his best enemy.
Anyway, “Smart is taking his last chance to settle. Geely will also open the doors of the Chinese market, the world’s first in terms of 100% electric vehicles, “adds Ferdinand Dudenhöffer, an industry specialist at the University of Duisburg-Essen.
Clogged market
This new playground will not be easy. The market is very crowded with plethora of young Chinese electric players and the government has just trimmed heavily in the grants awarded. In Europe, an area that weighs three-quarters of its volumes, Smart never managed to take off. “Its profitability has never been demonstrated. The small car segment represents about 1 million vehicles a year on the Old Continent, but it is very crowded. PSA has just withdrawn, “says Gaétan Toulemonde, an analyst at Deutsche Bank.
“The problem of segment A is that the difference in manufacturing cost with segment B is very low, while the selling price must be lower than 2 or 3,000 euros,” says the expert. Moreover, Daimler said that Smart would expand its business to larger cars.
Today, Renault is supplying Smart with its engines and platform, as part of its partnership with Daimler – 80% of the components are common between a Smart and a Twingo. The Smart For 4 have even been assembled for years at Renault in Novo Mesto, Slovenia. It will all be over in two or three years, when the current Smart models will be at the end of their life.
Launched in 1998 with the creative help of the Swiss watchmaker Swatch, the Smart brand (for Swatch Mercedes Art Car) has never met the expected success. The basic objective was to sell 200,000 units a year. But the trade records preceding the 2008 crisis never exceeded 150,000 sales. Last year, less than 130,000 Smart were sold. According to Evercore ISI, the division loses around 700 million euros a year …
“Of the two expensive doors with Mercedes quality, the public is very limited. There is no business model as it is, “says an industry observer. Twenty years, three generations of models and many failed reminders after, so it was time to radically change the approach. The break is anyway the essence of Smart – microvoitures city far removed from the guns of a house used to make large sedans for German highways.
Between 1998 and 2018, Smart sold 2 million vehicles.