Mike T.

From Automotive News Europe:


DaimlerChrysler's tiny Smart has big U.S. ambitions

Reuters / September 27, 2002

PARIS - DaimlerChrysler's pod-like, easy-to-park Smart cars have made their mark on Europe's cramped streets and now the group is eyeing a bigger challenge -- the United States, with its huge motorways and gas-guzzling trucks.

"There is a lot of interest in the United States," Smart car chief Andreas Renschler told Reuters in an interview at the Paris Motor Show.

"Obviously it is not a car for the Midwest, but maybe in California and the East Coast cities and Florida," he said.

Smart sold about 116,000 of its small cars in 2001, and analysts estimate annual revenues of about $1 billion, but due to high total investment costs, Smart does not expect to break even until 2004.

Smart debuted in 1998 as a tiny two-seater, whose length is roughly equivalent to other cars' width.

Smart cars also appealed to European consumers' environmental concerns -- the Smart CDI travels 29.4 kilometers on a litre of fuel, making it DaimlerChrysler's most fuel efficient car.

Having also entered the Japanese market, Smart now wants to tap the huge potential of the world's largest car market.

However, Smart's ambitions in the United States are being frustrated by regulations which require adjustments to Smart's fuel system. The cars would need a fuel filter which is too big to fit easily in the tiny car.

Renschler said Smart is in talks with U.S. authorities about finding a solution, but he does not know when a decision will be reached. He is more confident about reaching approval to sell the cars in Canada.

Renschler, who previously oversaw the launch of Mercedes' U.S. M-Class sport-utility plant in Alabama -- said Smart needed to sell about 8,000 vehicles to be profitable in the United States.

Industry analysts are skeptical of the tiny car's chances in America, where there is plenty of space for big cars and low gasoline prices stunt demand for fuel efficient vehicles.

ROADSTER REVS UP

Smart's growth also will come from new models, said Renschler. At Paris, the group unveiled the sporty Roadster, which hits the market in April 2003 with a longer front end and open top. It is hard to imagine how the very tall Renschler and Juergen Schrempp, chief executive of parent company DaimlerChrysler, fold into the little cars they admired at the show, but the Roadster is important for Smart.

"The introduction of the Smart Roadster and the Smart Roadster Coupe next year is the first decisive step in the extension of the product range of Smart and underlines the potential of the brand," said Smart in a press release.

Renschler hopes the Roadster, which breaks even at 10,000 units a year, will enhance the dynamic nature of the brand.

"The Roadster is more sporty, dynamic -- it is an emotional car with which the customer identifies himself," said Renschler.

"The focus on only environmental issues is not enough," he added.

Smart is also working with DaimlerChrysler's Japanese partner Mitsubishi Motors Corp. on a four-seater Smart.

Analysts have criticized DaimlerChrysler for continuing with the Smart project, originally the brainchild of the founder of Swatch, especially at a time when it was struggling to turn around its U.S. Chrysler arm.

In the last 18 months, however, DaimlerChrysler has sought to exploit cost savings between its many global brands and partners, and Smart is no exception.

"For us it is important to use the synergies for example in the sales network with Mercedes Benz," said Renschler. But Smart will never be a profit driver for the world's fifth largest automaker. According to CSFB, the mini and small car segment accounts for about 40 percent of the European market's volume but only about one percent of profits.

JRF

See email from Smart - Looks like we are looking at cars in the US arriving in 2004 - probably as 2005s. Almost identical to the A class introduction, perhaps a few months (or a year) behind.

____

Dear Mr. XXXXXX,

sorry, but at the moment smart is not available in the USA.

The smart gmbh is concentrating on successfully launching the smart vehicles in
the eighteen main European markets, Japan and Taiwan.
In a second step the smart gmbh considers to introduce smart in other countries.


smart has conducted several studies on the U.S. market – the economic aspects as
well as the acceptance of a new brand like smart have to be assessed. We foresee
a steady growing interest in a brand like smart, especially in the highly
populated, coastal regions in the East and West of the USA.

We have quite a way to go in deciding whether to come to the United States.
The certification costs, setting up and operating sales and service, as well as
communication costs are substantial. We continue to explore the possibilities
and assess the economic aspects as well as the acceptance of a new brand like
smart.

For the moment, no final decision has been taken so far. If we decide to
introduce smart to your country, it will anyway take about two years until
our vehicles will be available. First of all smart has to meet the US
specifications (licensing procedure i.e. safety and environmental
certification); however in case of launching smart in your market the USA smart
distribution network would be fully under the responsibility of the
DaimlerChrysler USA sales organization.

Following the terrorist attacks of 11 September 2001, an assessment of the
situation on the US market has become more difficult. We presently assume that
we will be in a position to reach a decision by the end of the year.

We hope, we sufficiently answered your questions.

For further information please do not hesitate to contact us.

Best wishes

your
smart Infocenter Team