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This Smart Car's Not So Dumb (Int'l Edition)


International -- European Business: Germany

This Smart Car's Not So Dumb (int'l edition)

Maligned at its debut, Daimler's tiny vehicle suddenly has lots of imitators

It's another weekday morning, and you're cruising to your office in what looks like a cross between a go-cart and a Barcalounger. You slalom between fullsize cars stuck in traffic, then brake to a walking pace as you gracefully merge with pedestrians on the sidewalk. People gawk and snicker. Let them laugh. You know better: You're driving the latest Mercedes.

The vehicle is DaimlerChrysler's self-propelled armchair, and it already exists. True, at the moment, the Komfortsessel is just another concept vehicle designed to test new technology, generate publicity, and make the company appear environmentally responsible. Then again, DaimlerChrysler could be serious about mass-producing the vehicle some day. Its smart car, a tiny two-seater powered by a three-cylinder engine, started out this way. And with sales of the much-maligned car, introduced last October, finally starting to show some life, Daimler and other European auto makers are taking a closer look at some of the wild ideas emanating from their design studios. That means everything from three-wheelers to cars that morph from station wagons into convertible sedans.

Carmakers are under pressure to do something. Analysts think a four-year boom in European auto sales is near its peak. Faced with a worldwide glut in capacity, carmakers must fight competitors for a dwindling number of customers. "The only way to increase sales is to take it away from others," says Thomas C. Aney, an auto analyst at HypoVereinsbank in Munich. "Niche cars are one of the best ways to do that."THREE-WHEELERS. Examples will begin appearing in showrooms as early as next year. Several are based on the same general theory as the smart: Europe needs vehicles able to cope with city centers first laid out in the Middle Ages. Next year, Ford Motor Co.'s European unit will start selling a two-seat electric car called the Think in selected countries. BMW is set to introduce a car-like motorcycle with a roof, known as the BMW C1, priced at $5,400. BMW and Mercedes have both experimented with three-wheeled vehicles that lean into curves like a motorcycle, with the passenger sitting behind the driver in a cockpit reminiscent of a jet fighter.

Auto makers are certain to offer more surprises when the International Auto Show opens in Frankfurt later this month. No doubt they'll be using DaimlerChrysler's smart project as a case study. Initially, the car seemed like a multibillion-dollar lesson in the perils of being too creative. The launch was delayed six months to make sure the smart wouldn't tip over too easily.

Even after costly modifications, the car, produced by a wholly owned subsidiary called MCC smart, had trouble shaking a reputation for instability. German newspapers showed a picture of a smart that skidded and wound up with its front end pointing skyward. Critics said the car, with a base price of about $8,800 and top speed of 135 kilometers per hour, was too slow and too small for the money. At 2.5 meters long, the smart is a breeze to park. But there's barely room behind the seats for groceries. "I have to decide whether to bring my girlfriend or a case of beer," gripes one analyst. Critics consider the ad slogan, "Reduce to the Max," too cryptic for a market where most potential customers aren't native English speakers. Releasing its first-quarter results in April, Daimler acknowledged that the smart had "not yet fulfilled our expectations."

Smart's marketers countered by cutting the price by $270 and boosting the advertising budget. The company even stationed smarts in city plazas and offered free test drives to passersby. And to counter a shortage of dealers, DaimlerChrysler may relax a brand-separation policy and allow some Mercedes dealers to sell the cars.

The measures seem to be paying off. Smart expects to sell 80,000 of the quirky little cars this year. That's below the original target of 130,000 but not the disaster some analysts predicted. The car is finding its niche as a second or third vehicle for commuters who save the big sedan for major trips. There are signs that DaimlerChrysler, which has invested an estimated $1.5 billion in the project, is prepared to spend more. Smart is in talks with France's PSA Peugeot Citroen to help provide a platform for a four-seat version. Diesel and convertible versions will be introduced in coming months, and smart is studying a sporty roadster. Analysts expect smart to build a version with a righthand steering wheel for the British and Japanese markets.

One reason DaimlerChrysler may be prepared to hang on is that other carmakers have already shown that an original idea can pay off big. A case in point is Renault's $13,700 Scenic, a minivan just slightly bigger than a standard hatchback. Renault expected the Scenic to appeal mostly to young families and account for maybe 10% of unit car sales. It turned out to appeal to drivers ranging from young singles to retirees, and now accounts for 17% of Renault's sales.

The Scenic has attracted a host of imitators. Next year, Opel will introduce the Agila, a so-called microvan priced in the same range as its $10,000 Corsa hatchback. "There's tremendous force on the auto makers to try to hit that sweet spot," says Nick Snee, an auto analyst at J.P. Morgan Securities in London. Innovation is also being driven by customers who are no longer satisfied with a mass-produced, one-size-fits-all car. Mercedes has already scored with its A-class, a snub-nosed, front-wheel-drive hatchback that differs markedly from its traditional sedans. DaimlerChrysler sold 136,000 of the $28,000 cars last year and expects to sell 200,000 this year.

The increasing demand for customization was one reason DaimlerChrysler bought a minority stake in Westfalia Werke on Aug. 27. Based in the town of Rheda-Wiedenbruck, Westfalia Werke customizes vans and recreational vehicles. Daimler looked into customization as early as 1995, when it built an experimental car with interchangeable roofs. It could serve as a station wagon, sedan, coupe, or convertible. Meanwhile, Toyota plans to build some models to order in just five days.

That's the same strategy Dell Computer Corp. uses to sell computers, and it could herald a day when cars are available in greater variety than they are today. If so, the smart may prove to be smarter than it first seemed. The company can assemble one in just four and a half hours, and its plastic body panels can be completely replaced in an hour. Analysts who admire such manufacturing innovations once said the smart was too far ahead of its time. Maybe its time is about to come.By Jack Ewing in Frankfurt, with Marsha Johnston in ParisReturn to top


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