After four-seater and sporty roadster versions of its Smart car failed to capture the market, Daimler (DAI:GR) is taking a counterintuitive approach to extending the brand: smaller and slower. Next year, Smart will bolster its lineup with an electric scooter, a prototype of which clocked a top speed of 28 miles per hour. The scooter and a €2,849 ($3,716) electric bike introduced last year are intended to shore up Smart’s image as a city transport specialist rather than just another automaker. “Smart is Daimler’s answer to the challenges of today’s megacities,” says brand chief Annette Winkler. The goal is to make city life “a little more colorful, cheerful, and healthy.”
Smart could use some merriment. The brand has racked up more than €1.5 billion in losses since its introduction in 1998, including a €120 million deficit this year, estimates broker Bankhaus Metzler. Besides its upcoming move into two-wheeled vehicles, Daimler is expanding Smart’s car lineup beyond the diminutive Fortwo, known for its two-tone color schemes and replaceable plastic body panels. In 2012 the automaker introduced an electric version of the two-seater, and as early as 2014 it may roll out a revamp of the basic Fortwo. Daimler has also teamed up with Renault (RNO:FP) on a new Smart four-seater that’s likely to reach showrooms next year.
Smart has never met its original global sales target of 200,000 cars annually. Yet Daimler, which doesn’t break out Smart’s earnings, has stuck with the brand because it can attract younger buyers and helps Daimler meet carbon-dioxide emission restrictions by offsetting the higher CO2 levels put out by bigger—and highly profitable—Mercedes-Benz lines like the S-Class sedan.
Smart’s future ultimately will depend on the consumer reception to the four-seater and the new Fortwo. With the new models, IHS Automotive (IHS) expects the brand’s sales to leap from 105,700 vehicles last year to about 190,000 in 2015.
Still, this push may be Smart’s last, figures Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany, and a former marketing manager for the Smart brand. “Smart won’t get another chance if they fail again,” Bratzel says. “They will do their utmost to prove that they can succeed.”
Daimler says it has no plans to drop Smart. The brand helps the group with electric vehicle technology, and the prices it charges for Smart cars more than cover the cost of the parts, spokeswoman Bettina Singhartinger says.
Earlier efforts to broaden the Smart brand haven’t clicked. Daimler stopped producing a low-slung roadster in 2005 after just two years on the market due to disappointing sales. A four-seat version was also abandoned in 2006. “Smart has burnt its fingers before, so they’ve probably been extra careful,” says Jonathon Poskitt, an analyst with researcher LMC Automotive in Oxford. “The intention to invest in expanding the product lineup is clearly positive.”
The brand began as a joint venture with Swatch Group (UHR:VX), which sold its holding soon after its debut. Late Swatch founder Nicolas Hayek, an adamant supporter of an electric version, lost interest after the concept was limited to a conventionally powered two-seater.
The conflict with Hayek and the unsuccessful expansion have overshadowed Smart as competition for urban drivers intensifies. BMW’s (BMW:GR) Mini has expanded into a seven-model brand. Fiat (F:IM) is adding to its 500 line; General Motors’ (GM) Opel last year introduced the Adam, a stylish minicar aimed at young buyers. All these seat four and have far more storage capacity than the tiny Smart.
The growing competition has pushed Smart to look beyond cars. A 2010 prototype of the E-Scooter was equipped with high-end features such as an airbag, antilock brakes, and a blind-spot assistant that warns the driver of nearby vehicles. Smart declines to give details of the production model beyond saying there will be “substantial changes,” spokesman Joachim Kutscher says.
The e-bike, a partnership with MIFA Mitteldeutsche Fahrradwerke (FW1:GR), features a 250-watt electric motor attached to the rear wheel, a lithium-ion battery pack that charges in five hours from a standard plug, and a carbon fiber belt instead of a chain for pedal power. Daimler won’t disclose figures but says it’s pleased with sales of the bike.
The emission-free two-wheelers—which either don’t require a driver’s license or have looser requirements than cars and motorcycles in most countries—are also aimed at winning a new class of buyer for Smart: urban dwellers who might not yet be drivers. That lessens direct competition with other car brands and establishes a connection to consumers who may later step up to a Daimler car. “We’re now in the position,” says Winkler, “to implement the great ideas of the founders of the Smart brand.”