The Smart Car Failed In The US, Now It’s Betting On China

Created by a Swiss watch company
and a German automaker, the tiny Smart car was meant to be
a revolutionary new idea in urban mobility. But more than 20 years
after its creation, the Smart car is struggling. Its parent, the massive German
automaker Daimler, doesn’t report Smart’s finances, but analysts estimate
the brand is losing hundreds of millions of
dollars a year. Now, Smart has a new direction. It is going electric and
partnering with Chinese automaker, Geely. The hope is the deal
will help Smart slash its onerous labor costs and give it exposure
to the world’s largest auto market. Industry watchers say it might
be the best chance to save the Smart brand and let
it live up to its potential. The Smart car was the
result of a collaboration between Mercedes-Benz and Swatch, the
watch brand which helped revitalize the deeply troubled Swiss
timepiece industry in the 1980s. In 1989, Swatch
founder Nicolas Hayek had an idea for a very
small, very affordable and highly efficient vehicle, that was, in his
words, “big enough to hold two people and a case of beer.” The car was meant to appeal
to young urban buyers and had features suggestive of the bright,
colorful swatch watches Hayek helped to make so famous. For example, the car was supposed
to have swappable panels so drivers could customize
its look. At first, Hayek tried to partner
with Volkswagen, but that deal fell through and then
Hayek turned to Mercedes-Benz. Mercedes had been working on
similar concepts from micro cars since at least the 1970s. The first Smart model debuted in
1997 at the Frankfurt Auto Show and production started in 1998. The company began selling cars later
that year in nine European countries. In 2008, a dealer
group headed by mogul Roger Penske began selling the smart
car in the U.S. based on success the group had
seen selling the car in Europe. The thinking was that at least
some Americans would also want a fuel efficient car at
a relatively low price. We went back and we sell
these vehicles today, The United Auto Group in the UK. We’re looking at the fortwo as
really a very, very strong residual vehicle. Fuel economy is one, but residual
value and low cost of ownership and certainly urban friendly
will make a huge difference in this product
in this marketplace. It came at the right time. Fuel prices rose to record highs
in 2008 and the Great Recession struck just as the first cars
were making their way across the Atlantic. The timing of this. The Smart debuted in the U.S. in 2008. That was right about the time that
fuel prices were about to go haywire. Also, it was right about
the time that the economic downturn in the US. So the Smart
at the time seemed like a very shrewd, very relevant,
new brand and vehicle introduction in
the U.S.. Penske became the sole distributor
of the brand for several years before handing the
business off to Daimler. In 2011, sales fell
to 5,208 cars that year, down from 24,622 in 2008. There were larger industry
trends working against the car. As the U.S. emerged from the
recession and gas prices fell from record highs, U.S. consumers flocked to sport utility
vehicles and crossovers to an unprecedented degree. Consumers are a lot more
interested in crossover, SUV type vehicles right now, and
modern crossover SUVs have very, very little fuel
economy difference compared to comparable of sedan vehicles . People really like the ease of getting
in and out of a vehicle that sits up a little higher
and has a higher roof. You know, people really like having
a hatch that is inherently more practical than a sedan. All smaller cars started to struggle
in this new landscape, but the Smart car seemed
a particularly tough sell. The only model Smart
sold in the U.S. was the fortwo. As the name suggests,
it had just two seats and very little in the
way of trunk space. While this made it extremely
maneuverable and easy to park, these were big sacrifices customers didn’t
have to make buying a subcompact car from another
manufacturer with comparable fuel economy and a similar price. The Smart was really pretty unsuited
for the rest of the country. This is a car that
costs about the same as other compact cars. In the end, the
fuel economy ended up nearly not being much better at all
than other larger four-door compact cars. This was
a pretty out-of-step crop. It only had two seats, it was
perceived by many to be unsafe just because of its small size,
never mind what the marketing told them. And the car
was underpowered, it had this terrible transmission. It simply required way too
many sacrifices that the consumer from an American perspective,
far too little benefit. In early 2019, Smart said it
would pull out of the U.S. after years of
increasingly dismal sales. The brands sold just 1,276
units in the U.S. in 2018, down from a
mere 3,071 in 2017. Mercedes-Benz told CNBC it chose to
pull the Smart brand from North America for a number
of reasons, including a declining micro car market in the U.S. and Canada and high compliance costs
for a low volume model. The company will continue to
provide warranty and service support for the Smart models
sold in the U.S. In Europe, Smart cars have sold
in far higher numbers, but it still has not been enough
to make money for Daimler. The margins on small economy cars,
even chic, eco friendly ones, are as thin as blades of grass. It’s all about the sharing
of technology, the sharing, the things that, you know, you see
underneath, that you don’t see normally underneath the bodywork
things like engines, gearboxes, platform architecture. And 90,000 units is not very
much to drive that from, especially in the lowest price
category of the entire industry. At least one analyst who
follows Daimler estimates the brand loses about $500 million
on Smart per year. I mean, manufacturing cars is damn
difficult and it’s very, very hard to make money. So, you
know, the bigger the car is, normally the more money you make
you make with it and the smaller the car is, you
know, the price drops down. And when it comes to the size
of a Smart, it’s very, very hard at the selling price of,
you know, $12,000-$15,000, maybe $18,000 to really make money
with such a product. And we’ve seen that
over and over again. Smart’s particular trouble is that it
relies on high cost labor, say analysts. Up until 2019, all
Smart cars were manufactured at a purpose built factory Smartville
in Hambach France, near the French-German border. What Smart does have in its
favor is a strong brand message. The cars are innovative. They’re a fancy design,
a colorful design. So I would say in general they
have a good, you know, they have a good brand
image, good heritage. Saving on gas and reducing
carbon emissions is a powerful selling point for some
customers around the world. For example, in Daimler’s home
country of Germany, one-third of voters under the age of 30 voted
for the Green Party in European elections in 2019. Europe always had much
more focus on, you know, on clean mobility. The, you know, the rules are
much, much stricter for fuel economy in Europe. Everything’s much more CO2
based in Europe. And hence, the vehicle fleet is
also very, very different to the fleet in the U.S. And there
is China, which developed what are regarded as perhaps the world’s
most ambitious plans to promote electric vehicle adoption
around the world. Smart announced its 50/50 partnership
with Geely in 2019. One of China’s largest automakers,
Geely already owns Swedish carmaker Volvo and has spun
out Volvo’s Polestar performance sub-brand into a standalone
nameplate for fully electric, high-end vehicles. Like the high-end Polestar cars,
Daimler and Geely’s Smart cars will be fully electric and
will be manufactured in China. If it goes as planned,
cheaper Chinese manufacturing will help Smart lower its labor costs and
make money off its cheaper cars. The partnership will also give Smart
a chance to compete in the massive Chinese auto market, the
largest in the world. 28 million new automobiles sold
in China in 2018, and there are already more electric cars
in the country than in every other country combined. It really opens up the Chinese
market with 23-25 million units annually in a couple
of years time. By far the
largest market globally. We talk about tier one cities
with huge traffic, so a small, Smart car can really make sense. Such a massive potential appetite
for a small electric vehicle could finally give Smart the market
it needs to realize the goals of its inventor.

100 thoughts on “The Smart Car Failed In The US, Now It’s Betting On China

  1. I love my Smart car. I bought it used for $6k with 30k miles on it and it’s been great!

  2. I've always lusted after a Smart. My wife hates them so for a compromise we bought a Tigra. A 2 seater, a very small sports convertible. We both love it to bits and I can do any maintenance myself even the major stuff. So I might never own a Smart, and this thing is a great substitute. I like the Twizy too but they're even worse than a Smart for value..

  3. Build a big ugly gas guzzling suv and Americans will buy it…examples are Toyota, Nissan, Honda, Mazda for example all make giant suvs and pickups only available in the usa and even For wants to stop making cars nuff said

  4. Because its small and too expensive.Wish you all the best.Jesus bless. The Gospel is 1Corint 15:1-4

  5. I like small cars. I had a Honda AZ 600. Cars don't get much smaller. However, I don't like the Smart. My nephew had one. I drove it and hate the shifting.

  6. I'm really better off with a focus or fusion. The hybrid Ford Fusion gets 50 mpg and 10 times safer.

  7. Low Q DM and these car😒 & CNBC employee 😏 you buy the car🚗 so in small traffic accident you will not be a life.

  8. Death trap. I'll take a big luxury car any day. Give me a big mid 90's Lincoln town car.

  9. They've changed the Smart way too much. Back in the early 2000's, it was a nice new concept, and they were affordable, cheap to run and very small. Now, they're getting fatter, more expensive to make and maintain… they shouldn't call it "Smart" anymore.

  10. I always thought about buying a cheap used one for a secondary vehicle , thinking it would be fun to drive around occasionally , I found one
    for sale , and the man selling it was telling me about the car, and said, I Just put 900 dollars in tires on it, and continued telling me about the car, I said, wait, 900 dollars for tires? he said, yeah, they are a special size that hardly any tire dealers carry , I had to look all over till I found somebody that had them in stock, after hearing that, I no longer wanted one.

  11. You could get a Corolla for a similar price, you could fit more than 2 passengers in it, you could drive on the Interstate, and you wouldn't need premium gasoline.

  12. I saw one the other day in Denver. It was snowing a little bit but the car could barely get up a hill. We have mountains so it’s useless.

  13. Price is not a matter for most chinese people if they can afford a car, they want luxury and safety, electrify the smart with very limited range might not be a gd idea, also lack 4-matic, diesel or gas with plug in hybrid! They want high tech stuff, put digital cockpit big touch screens will sell

  14. I just love my smart. It fits like everywhere and it's really nice to drive! Don't know how one can't like it …

  15. I have a 2016 Smart car (gas) and I love it. I wouldn't drive anything else!!!!You don't know what your missing. It has a steel body…The new body style is wonderful and turbo. It also has a steal body. I can turn it literally with my finger. It has a lot of room. My husband is 6'1 and he fits fine. My friend is 6'6 and he fits fine. What a shame that they are getting rid of it in the States. People, you don't know what your missing. I like it better then my Mercedes Benz…

    Note: I also think what happened in the past with the Smart car, when it first came on the market, it was a little rough ride and it steered people in another direction. Since they changed the in 2016, it is now amazing. What a shame, I guess I'll have to order my next one in China.

  16. These car's are straight garbage. I worked at a penske Mercedes dealship where they sold these. Everyone who bought one hated it. They broke down like crazy, sounded like a go-kart, garbage gas mileage. They tried attaching to the Mercedes name so the customer expected the same quality. It was a nightmare. Complete trash.

  17. WhenI was visiting Rome last year there were lots of them. I joked that it was the Smart car capital of the world…

  18. Because it looks super stupid. Its the perfect car for soy boys who no longer have their balls or femenists.

  19. There has to be some kind of benefit……. reliability, price, fuel economy, ease of maintenance …… not seeing it here.

  20. This car is a joke. 30k for a car with 63 miles of range. Just pay another 8k and get the tesla model 3 LMFAO.

  21. I use to not like these cars, but now I like them, because I now see something in them I didn’t be for.

  22. Bought one with silver black color back in 2016, powerful, same luggage area as a Camaro, perfect for short trips in a city environment.
    It saves gas and environment, 35mpg, unlike electric cars, which only sales an idea of a green future.

  23. Working right beside a fiat dealership, made me realize how unreliable their cars were. The overall experience was just terrible for the intended demographic. Shoddy engineering.

  24. If won't have a future in China either. These people don't understand how Chinese think about cars.

  25. 2:53 and 2:54

    Why CNBC. Putting footage of wall street journal during the great recession.

    Well, you people must hate them a lot

  26. I own one. They are quirky but lovable… Mine is a diesel version (cdi) and gets 50 mpg+ Happy/sad to see the change…

  27. Shocker. America is designed for big cars and fuel is ridiculously cheap there (when fuel prices are high for the US its still will waaaay lower than EU prices). Try and drive one of the American monster cars around a European city with crowded narrow roads and limited street parking and you'll see why smart cars do well in Europe. Almost every car company in Europe now has a smart car clone.

  28. Smart car failed in America? A tiny, go cart sized car in a country that historically likes big cars? Gee, I wonder why? 🤔

  29. BAd transmission choice and so so mileage. A Mitsubishi Mirage drives better uses regular gas and gets 45 mpg and you can out 5 people in it if you had too. case closed for Smart car.

  30. Itd perfect for NYC. Beats having a motorcycle as the main method of transportation. This is ideal for the city but price, gas milage, etc made me not want me to get one

  31. Its nothing but a fancy over priced go-kart. Yes, you can park it practically anywhere.

    However, due it size, the vehicle does not carry nearly as much weight as a standard size compact vehicle, therefore, there is no reason why it should only be as economical as a normal compact.

    Being a much lighter vehicle, this car should be giving the consumer at least 45mpg – 50mpg and I'm being generous. Not to mention, they don't even manufacture this vehicle with a manual transmission. Which would make more sense since the car is so small.

    Also, because its so small, meaning people would need to sacrifice so much space, (less room for passengers, groceries, etc) the vehicle should be priced at no more than $9,500 – $11,000 depending on features.

    Maybe THEN people will buy them and they would be high in business. People aren't "that" stupid.

  32. this work in Asian,,not in US,,because of the price and AMericans love space cargo

  33. You can get a Prius Prime for about the same price. That shows how expensive smart cars are

  34. When I saw initial marketing they talked about 60MPG which was something I was looking forward to however when they actually came to the USA they were barely over 40MPG. I wondered what happened?

    Part of the problem was that the 60MPG figures were miles per 'Imperial gallon' .. not 'US gallon' (thats a 20% difference there). I think other problems may have been differences in testing methods — and they may have had to do mileage-cutting safety/emissions modifications.

    Overall, like the video said,
    – it just wasn't any cheaper than other small compacts with more room
    – it had nearly identical gas mileage as those small compacts
    If just one of those two issues weren't there then it would have been a much better sell for me.

  35. They didn't take off because they are too expensive and the new direction is bad, I only want ICE cars. I own a 2008 smart fortwo. Ill buy more, but never an electric. Smart also made the mistake of using Mercedes making the price 3x what it could have been!!!

  36. It was a really bad car that was stupid not smart. Prius was a smarter car

  37. You can’t take it out on the freeway unless you have a death wish. The only thing that would save you is if it would just roll like a ball in an accident.

  38. America have bigger roads than Europe. It seems they favor medium size & huge automobiles. I think they want the convenience of carrying & lugging things like sporting goods, grocery, & furnitures.

  39. I dont care for smart cars but I hate suv's. I also find them more prone to rear end collisions due to the car behind them not being able to see what in front of the suv.!

  40. Why do any smart, future orientated vehicles fail in the USA??
    A:They make their owners look even stupider than before.
    Who wants a car that outperforms you in ever way?
    Reliable, low impact, easy to park and garage.
    Safe, easy to repair…
    And they FAILED in the USA
    Seriously, what does that tell YOU??
    Maybe the car did not fail, could be the fault of town planners; expanded cities connected by freeways.

  41. Having owned one for some years and know pretty much everything I need to know about one I can only say had the car been reliable from the start then it may of sold so much better but far to much of the design had issues built into the car, the one big thing network garages pray on is the Turbo, comes as one piece with the manifold which is made of monkey metal, use the cars turbo and the metal of the manifold will heat up, once it cools down the metal cracks, your dealer will tell you the turbo is broke but its only the manifold showing cracks in its metal, should it break then you will know about it, the noise is quite something behind you. Best bet is an after market manifold made from stainless steel, my car has done 180,000 with 120,000 of those without replacing a turbo at around £1000, I think its a con so beware

  42. This lil ass car was and is so weak. I feel like two people can lift this car into the air

  43. I looked at the car in 2009 the price and gas mileage made no sense . No value there so many other cars to choose from. The thing needs to get 60miles to the gallon and be under 10 grand for me to even consider it an option.

  44. If I lived in the city I would definitely get one, but as someone who lives in the suburbs and have to travel farther between places I’d rather have a four door compact with trunk space. That’s why I’m looking into the Prius or an all electric car

  45. I liked the Smart but it was expensive, had a lousy transmission, poor gas mileage and required premium fuel. I bought a Honda Fit instead.

  46. Bro you tryna sell a tiny car in a country where the smallest soda cup is XL in other countries. Americans favor everything bigger

  47. Because you can get a 2014 Elantra coup GS for half the price but 10 x the car

  48. Who thought that the smart car would be successful in a country that worships it's gigantic trucks?

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