Smart aims for profit and US acceptance

Daimler Corporation's eco brand Smart will turn a profit this year, for the first time since the brand's inception in 1998. Or so says President and CEO of Mercedes-Benz Australia, Wolfgang Schrempp.

Schrempp revealed the brand's move into the black at this week's Australian launch of the second generation fortwo in Sydney (more here).

He said the turnaround is expected despite "understanding concerns for the brand" and its single model offer.

Indeed, Schrempp says the latest fortwo signals a new beginning for the smart brand which he admits made some mistakes "overestimating customers" with the now-discharged forfour hatchback and roadster models of the original lineup.

"When we launched the forfour we said it's a real smart but the concept of smart is the fortwo. That was the [original] idea: for two people and some luggage; not lengthy distances and with low fuel consumption."

The previous smart fortwo earned 770,000 sales across the 30-plus countries where it is offered. Significantly, the USA has recently joined the list and the brand expects to turnover 30,000 fortwo models in that market alone this year.

Schrempp told the Carsales Network that combined with the parent company's willingness to meet 'whole of brand' industry emissions standards by 2012, admission to the US market helped commit Mercedes-Benz to furthering the smart brand's cause.

"We had to make a smart that would sell in the USA and pass its safety regulations. We were [selling] in 36 countries and asked where we could go to make a dramatic [sales] increase.

"Additionally, people in the US are trendsetters. A few years ago nobody cared about fuel prices in the US, and it didn't matter if you had a 5.7-litre engine running at 18 litres fuel consumption. This is now changing and they are thinking about the environment.

"I think there were thousands of tourists to Europe coming back to the US, entering a Mercedes dealership and saying: 'I want to buy a smart'. It created a situation where some of them took a car from Germany and brought it to the US, under a special arrangement with the government to drive the car."

US racing, logistics and auto industry stalwart Roger Penske has taken on the smart brand as part of his extensive operations network in the US. Mercedes will use Penske's network rather than its own for at least two years.

"We thought especially in the first years we have to take care because our expectation is not that sales will immediately make 100,000. Our start with 30,000 orders is certainly not bad."

The orders were taken after a campaign in the US asking interested buyers to leave a $99 deposit for the sight-unseen smart. Such a level of pre-ordering is a massive departure from usual US car buying practices.

"The US buyers have totally different behaviour," opined Schrempp, illustrating the strength of the early acceptance of smart.

"In Germany 80 per cent of Mercedes cars are pre-ordered. The buyers come to the dealership, look through the list and ask for certain colours and certain leather and then want to know how long it will take. The majority in the US go into a showroom and take what's there."

To comment on this article click here