Tiny Smart Car Hauls Big

Author: Anthony Fontanelle
More than 20,000 people have paid $99 deposits to buy Smart cars when the iconic two-seaters manufactured by DaimlerChrysler AG went on sale in January. "The response has been overwhelming," David Schembri, president of Smart USA, said at the Smart Fortwo presentation in Detroit Tuesday.

Michigan residents will have an opportunity to test drive the Smart car next week when the automaker brings five Fortwos to the Ann Arbor South University Art Fair as part of a cross-country road show.

Kat Dougherty, an information systems manager from Columbus, is thinking of putting down a deposit after seeing the boxy, 8.8-foot car in Port Huron. The owner rode in from Canada, where the car has been available since 2004. "He told me it got great gas mileage, around 49 to 50 miles per gallon," Dougherty said.

The Smart car that will be sold in the United States is inspired by the second-generation model recently launched in Europe. Built by the Mercedes Car Group at a factory in France, the car will be available in three trim levels with an MSRP of less than $12,000. It will be sold in the U.S. through a distribution agreement with Roger Penske, chairman of Penske Automotive Group. The
car may not be equipped with a Mercedes Benz water pump but its features are equally-striking as its siblings.

The car's launch in U.S. is critical to the future of the Smart business, which has been downsized significantly in the past couple of years after losing more than $4 billion since its launch in 1998. DaimlerChrysler AG CEO Dieter Zetsche has eliminated a Smart four-seater and plans for a Smart SUV to refocus the brand on the Fortwo.

The Fortwo, launched as City Coupe in 1998, is the original Smart model. The name Fortwo was introduced when the automaker started producing additional models. The car was designed primarily for urban use in European cities, where parking is insufficient and fuel economy is of great significance. Additionally, the Fortwo's length allows as many as three of the vehicles to be parked in the space usually taken by one standard-length car.

In the past nine years, 770,000 Fortwos have been sold around the globe, and the car has established a cult following in some European capitals. Schembri declined to offer U.S. sales forecasts, but said he expected the recent rise in gas prices to bolster demand for the car. He said the car will get more than 40 miles per gallon in combined highway-city driving, helping to improve the U.S. fuel-economy ratings of the soon-to-be-renamed Daimler AG.

Then again, people wonder how such a small car would withstand a collision with a pickup or SUV, Schembri said. "The first question people ask is, is the car safe?" He said the occupants are protected by "a reinforced steel frame that acts much like a Nascar roll cage."

In addition to its diminutive size, the car has other limitations that may restrict its appeal in the U.S. market, said Tom Libby, senior director of industry analysis at J.D. Power and Associates. Its top speed is 91 mph and it seats only two. "After an initial surge of excitement, it will level off as a niche vehicle in this market," Libby said.

Libby expects Smart will end up with a smaller slice of the American market than BMW's Mini, which has sold around 40,000 vehicles in each of the past couple of years. "To me, this is more of a niche than the Mini." So far, Smart is stirring up a lot of attention in the run up to its introduction.