When Sandro Bufacchi began selling Smart cars back in 1999, it was tough. Italy's auto market was sluggish, and showroom traffic was thin. But Bufacchi, 52, was convinced that DaimlerChrysler's tiny, $8,500-plus two-seater was ideal for getting around Rome's narrow streets. All that was needed was a bit of street theater. In a ruse that still makes his German bosses chuckle, Bufacchi had his friends cluster outside his small showroom on Rome's elegant Piazza San Lorenzo in Lucina to pique the interest of passersby. Today, Bufacchi and his five dealerships move more than 7,000 Smarts a year. "These cars now sell themselves," he says.
The boxy car with the bulging headlamps has made a big splash in Rome and Berlin since its 1998 debut. And no wonder: At less than 2.5 meters long, it's a cinch to park, and it gets 70 miles per gallon. The brainchild of Swatch founder Nicolas Hayek, the Smart was developed in a venture controlled by Mercedes-Benz, which bought him out in 1998. In Italy, it has achieved cult status, with proud owners dubbed smartisti.
The question now is whether this mighty mite can make it in the land of the pickup truck and the SUV. A successful U.S. launch could help DaimlerChrysler bolster its returns on the Smart brand. Right now, losses are running at $300 million a year. So it's no surprise that DaimlerChrysler executives are considering shipping the Smart to the U.S. They plan to target hip customers in cities such as Los Angeles, Miami, and New York. "It's not a car for the Midwest, but the convertible would be nice in California," says Andreas Renschler, head of Mercedes-Benz's Smart division.
Smart revenues topped $1 billion last year, powered by the introduction of a soft-top convertible and a 14% increase in sales. In the first half of 2002, sales climbed 6% despite a 5% drop in the overall European car market. Yet DaimlerChrysler doesn't expect the marque to turn a profit until 2004. Analysts figure the company could charge as much as $15,000 for a Smart in the U.S., a higher price that would boost margins at the unit overall. Bringing the Smart to the U.S. would also help DaimlerChrysler boost its average fuel efficiency across its vehicle fleet in line with U.S. regulations.
One challenge: to convince Americans that the Smart won't be flattened in a run-in with a hulking SUV. DaimlerChrysler says the Smart performs well in crash tests, even with big vehicles, thanks to its reinforced-steel frame.
Indeed, DaimlerChrysler has not skimped on cost. Its total investment in the Smart, including development costs and operating losses, will total $2.5 billion by 2004. The company is also marketing the car in Japan and Taiwan. DaimlerChrysler estimates that for a U.S. launch to be profitable, it would have to sell 8,000 Smart cars a year.
That target doesn't seem far-fetched, considering the success of the Mini Cooper, BMW's reinterpretation of the venerable--and tiny--British original: Nearly 7,000 have been sold since the U.S. launch in March. Wes Brown, an analyst at Nextrend Inc., a Thousand Oaks (Calif.) market researcher, believes that U.S. sales of the Smart could reach 20,000 vehicles a year. "It's a cool-looking car," he says. "Nothing else looks like it on the road."
Although many Europeans rave about their Smart cars, success in the Old World has been patchy. Even though the Smart is assembled in Alsace, the French have shunned it and stuck with their own subcompacts, such as the $10,850 Peugeot 206 and the $9,050 Renault Twingo. Some European customers say a two-seater with a top speed of 135 km per hour (80 mph) has limited use. Says Frankfurt taxi driver Hans-Jürgen Stiehl: "For what it costs, you can get a real car, like a [Volkswagen] Lupo."
Maybe expanding the menu of Smarts will increase its popularity. DaimlerChrysler is launching a sleek Smart roadster next year. It has teamed up with Brabus, a German company that specializes in customizing cars, to produce high-performance Smart models for customers who want more pep than the current three-cylinder engine delivers. Daimler is also working with its Japanese affiliate, Mitsubishi Motors Corp., to produce a four-seater in 2004, to appeal to a broader audience. One way or the other, the ranks of the smartisti will grow.
By Christine Tierney in Frankfurt, with Laura Angela Bagnetto in Rome and bureau reports
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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