Smart cannot meet US demand
First comes the news that Prius sales have doubled this year, and now there’s word that Smart has booked orders for more vehicles in the United States than it can produce.
Dieter Zetsche, the failed former chief of Chrysler who’s somehow managed to hold onto the job as CEO of Daimler, has issued a statement saying that Daimler has received “more than 30,000 down payments” from buyers in advance of the Smart’s U.S. introduction next month. These orders are "far beyond the production capacity we have for next year," he said. The base price is expected to be $11,590, making it an extremely cheap car.
Whether that demand is real, however, is another question.
Earlier reports had indicated that speculators were placing orders for Smarts, anticipating that initial demand would be high and that the speculators could sell either their place in line or the car at a premium. The Smart is, in many respect, more a fashion item than a car, and its low price is actually designed to attract a high-income buyer. The Smart is being portrayed as simply another consumer item, a city car, one that is being pitched to the same crowd that had to have home theatre and the first flat-screen tv. It’s not being pitched as an economy car for the budget-minded.
In fact, the latest announcement from Daimler seems calculated to promote exactly that sort of feeding frenzy, all to the benefit of sales, no doubt. It certainly does appear that the first buyers of the car will make out, at least for the first year or so, as the resale value of the car will undoubtedly remain high.
Despite all of this, it appears that Daimler has a serious doubt about the viability of the brand, long-term, in the United States. Smart has never been a smart move for Daimler, which originally made the decision to build the car as a joint venture with the Smart Swatch watch people. (And when’s the last time you saw someone wearing one of those?) As first conceived, it was to be a car that you could buy different body panels for, and switch from one version to another in your garage in a short time with only a screwdriver. That idea didn’t come to fruition, either.
Then, the Swatch watch people ran into money troubles, and bailed. Daimler had to either pick up the pieces or dump the project. The smart – sorry – thing to have done would have been dumping the project, as the A Class was already well under development at the time. Instead, they picked up the pieces and ended up with a vehicle that, despite similarity in appearance to the concept, was much more an ordinary and routine automobile than had originally been the plan.
Since its introduction, Smart has never really had a rational place in the Daimler line-up. It’s the ultimate “cute car.” Cute cars have a limited life span in the market. Two others illustrate the point: the VW Bug and the PT Cruiser. They, too, are both cute and are both distinctive by that cuteness. But, that leaves very little room for freshening the styling, because any major change makes the vehicle significantly dissimilar to the original and, almost inevitably, eliminates much of the cuteness. So, the product ends up losing that fresh appearance as it becomes more familiar, and sales erode, and then decline precipitously. It’s happened with both the Bug and the Cruiser.
Introduction of the Smart into the United States seems more like a move calculated to take a quick profit on a spike in demand than to enter the market for the long haul. Daimler isn’t selling it through Mercedes-Benz dealers, or it’s regular distribution channels. Instead, it’s given that job to Roger Penske, who is the importer and is the guy setting up the distribution and dealer network. Penske’s talents as a businessman are obvious, but the decision of a major automobile manufacturer to bypass its own established distribution channels and, instead, inject a middleman into the revenue stream suggests that they don’t see the long-term potential as justifying the investment required to add the vehicle to their established network.
But selling the car in the United States, especially if it doesn’t require an investment, is certainly a way for Daimler to make a quick buck. They’ve been selling the Smart in Europe for several years. So, they’ve long ago paid back the costs of developing the car and setting up the production capacity. At this point in its life, the Smart probably costs Daimler only the price of the components and the wages of the employees that assemble it. Sending the car to the States allows Daimler to wring a few more profitable units of production out of the current facilities.
In the meantime, cuteness may be catching on at another German brand. BMW is rumored to be planning to bring back the Isetta. It’s hard to think of anything cuter than an Isetta, what with the front of the car being a door and the steering wheel folding away. And, of course, it’s the first car that post-war BMW produced, so it’s part of their heritage.
Who knows? Maybe someone will resurrect the King Midget next.