Bloomberg
Daimler AG’s two-year effort to win over U.S. drivers with a thrifty, plastic-clad minicar is running out of steam, adding urgency to the German automaker’s effort to find a partner for the Smart brand.
The U.S. debut of the urban two-seater is foundering after a promising start in 2008, when North American sales propelled Smart to its first profit. With just one model, the “ForTwo,” U.S. sales plunged 41 percent to 14,600 cars last year, more than the 15 percent decline by Daimler’s Mercedes-Benz.
“Smart’s not a car in the traditional sense, it’s a high- style alternative to public transportation,” said Jim Hall, principal of consulting firm 2953 Analytics who has worked with General Motors Co. and Toyota Motor Corp. on model development. “The problem for Smart is that fashion tends to be fleeting.”
Smart’s fading fortunes in the U.S. highlight Daimler’s need to find a partner to expand the model lineup and lower costs as it commits $2 billion to boost compact car offerings. The manufacturer is in talks with Renault SA and other carmakers on potential “close-knit” cooperation, Chief Executive Officer Dieter Zetsche said Dec. 17.
“The lack of success in small cars has been a big strategic weakness, and Daimler likely needs a partner to turn things around,” said Stefan Bratzel, director of the automotive institute at the University of Applied Sciences in Bergisch Gladbach, Germany.
Cheaper Alternatives
The brand sputtered with new models, and consumers favored Bayerische Motoren Werke AG’s Mini. There are better-value alternatives to the ForTwo, which starts at $11,900, Hall said.
Smart’s weakening in the U.S. accelerated in the fourth quarter, when sales totaled 2,174, a 66 percent contraction from a year earlier. BMW’s Mini had 10,229 U.S. sales in the period, a decline of 24 percent. In December, Smart sales were lower than GM’s Saab, which is in the process of being closed or sold.
“Smart is very important for Daimler,” Bratzel said. “If you want to survive as a global carmaker, you need small cars because that’s where the growth is, especially in markets such as India and China.”
At the Detroit auto Show today, Smart will introduce a “chrome yellow” special edition and present a car-sharing project piloted in Austin, Texas. The size of the display is unchanged from a year ago.
The Right Stuff
“We still believe the Smart ForTwo is the right car at the right time in the right place,” said Ken Kettenbeil, a Smart USA spokesman.
Penske Automotive Group Inc., the sole Smart distributor in the U.S., moved on Jan. 4 to “reinvigorate” sales by naming Jill Lajdziak as president of Smart USA. The former general manager of GM’s Saturn aims to bolster awareness of the minicar.
“There is a definite ‘wow factor’ when people sit inside the car,” said Kettenbeil. “Many are surprised about the vehicle’s roominess.”
Daimler introduced Smart in Germany in 1998 and brought it to the U.S. 10 years later, achieving 24,662 sales that year. That helped the brand make its first profit, though Smart has never met an original global target of 200,000 deliveries a year.
The top markets are Germany, where sales rose 2 percent last year to 32,400 vehicles, and Italy, where deliveries declined 15 percent to 29,500. Global sales dropped 13 percent to 116,900. Smart sold 1,800 cars last year in China.
Daimler Results
Helped by a tripling of profit at Mercedes-Benz Cars, which includes Smart, Daimler ended a run of three quarterly losses in the third quarter as it targeted annual cost cuts of 5 billion euros ($7.2 billion). Boosted by new Mercedes models, Daimler may post profit of 1.76 billion euros in 2010 after an anticipated loss of 1.91 billion euros in 2009, according to the median estimates of 17 analysts surveyed by Bloomberg.
Daimler said Jan. 8 that a new look for the ForTwo should boost sales in the second half of 2010.
Even so, BMW is selling almost twice as many Minis and increasing production of the car, a retro version of an iconic compact. The Mini has been popularized in movies including the remake of “The Italian Job,” while the Smart appeared in new “Pink Panther” films with Steve Martin.
“It’s very difficult for Smart to duplicate the success of Mini,” said Rebecca Lindland, director of auto research at IHS Global Insight in Lexington, Massachusetts. “The primary characteristic of Smart is that it’s small. The primary characteristic of Mini is that it’s irresistibly adorable, with performance thrown in.”
Test Drives
Daimler expects a publicity boost when it rolls out a limited-series electric Smart in the U.S. and Canada in late 2010, and plans a push to get more drivers to test the ForTwo, similar to a 50-city road show in 2007.
The ForTwo, at 8 feet, 10 inches, is more than three feet shorter than BMW’s Mini. Some Americans are reluctant to buy minicars because they are overshadowed on the road by massive pickups and sport-utility vehicles.
“The car is just so tiny in the U.S.,” said Lindland. “I had a Mini and there were friends of mine who were afraid to drive with me.”
Smart’s U.S. appeal also may be suffering because consumers can choose alternatives like the Hyundai Accent, which seats five people and is more than 12 feet long, with a starting price that’s $2,000 less.
Swatch Venture
Smart began as a joint venture with Swiss watchmaker Swatch Group AG. Daimler took control in 1998 after a disagreement over developing a SwatchMobil model. Daimler is now looking for a partner with expertise in small cars to boost volumes and spread development costs, and aims to make a decision by June.
To improve U.S. prospects, Daimler is considering a four- seat Smart after it refreshes the current model. A previous “ForFour” was canceled in 2006 as part of a restructuring that ended production of a roadster and development of an SUV.
“It’s a tough sell,” said Lindland. “They’ve got to be really hopeful that gas prices increase or regulations change. Without that, consumer behavior isn’t likely to shift in Smart’s favor.”
The U.S. debut of the urban two-seater is foundering after a promising start in 2008, when North American sales propelled Smart to its first profit. With just one model, the “ForTwo,” U.S. sales plunged 41 percent to 14,600 cars last year, more than the 15 percent decline by Daimler’s Mercedes-Benz.
“Smart’s not a car in the traditional sense, it’s a high- style alternative to public transportation,” said Jim Hall, principal of consulting firm 2953 Analytics who has worked with General Motors Co. and Toyota Motor Corp. on model development. “The problem for Smart is that fashion tends to be fleeting.”
Smart’s fading fortunes in the U.S. highlight Daimler’s need to find a partner to expand the model lineup and lower costs as it commits $2 billion to boost compact car offerings. The manufacturer is in talks with Renault SA and other carmakers on potential “close-knit” cooperation, Chief Executive Officer Dieter Zetsche said Dec. 17.
“The lack of success in small cars has been a big strategic weakness, and Daimler likely needs a partner to turn things around,” said Stefan Bratzel, director of the automotive institute at the University of Applied Sciences in Bergisch Gladbach, Germany.
Cheaper Alternatives
The brand sputtered with new models, and consumers favored Bayerische Motoren Werke AG’s Mini. There are better-value alternatives to the ForTwo, which starts at $11,900, Hall said.
Smart’s weakening in the U.S. accelerated in the fourth quarter, when sales totaled 2,174, a 66 percent contraction from a year earlier. BMW’s Mini had 10,229 U.S. sales in the period, a decline of 24 percent. In December, Smart sales were lower than GM’s Saab, which is in the process of being closed or sold.
“Smart is very important for Daimler,” Bratzel said. “If you want to survive as a global carmaker, you need small cars because that’s where the growth is, especially in markets such as India and China.”
At the Detroit auto Show today, Smart will introduce a “chrome yellow” special edition and present a car-sharing project piloted in Austin, Texas. The size of the display is unchanged from a year ago.
The Right Stuff
“We still believe the Smart ForTwo is the right car at the right time in the right place,” said Ken Kettenbeil, a Smart USA spokesman.
Penske Automotive Group Inc., the sole Smart distributor in the U.S., moved on Jan. 4 to “reinvigorate” sales by naming Jill Lajdziak as president of Smart USA. The former general manager of GM’s Saturn aims to bolster awareness of the minicar.
“There is a definite ‘wow factor’ when people sit inside the car,” said Kettenbeil. “Many are surprised about the vehicle’s roominess.”
Daimler introduced Smart in Germany in 1998 and brought it to the U.S. 10 years later, achieving 24,662 sales that year. That helped the brand make its first profit, though Smart has never met an original global target of 200,000 deliveries a year.
The top markets are Germany, where sales rose 2 percent last year to 32,400 vehicles, and Italy, where deliveries declined 15 percent to 29,500. Global sales dropped 13 percent to 116,900. Smart sold 1,800 cars last year in China.
Daimler Results
Helped by a tripling of profit at Mercedes-Benz Cars, which includes Smart, Daimler ended a run of three quarterly losses in the third quarter as it targeted annual cost cuts of 5 billion euros ($7.2 billion). Boosted by new Mercedes models, Daimler may post profit of 1.76 billion euros in 2010 after an anticipated loss of 1.91 billion euros in 2009, according to the median estimates of 17 analysts surveyed by Bloomberg.
Daimler said Jan. 8 that a new look for the ForTwo should boost sales in the second half of 2010.
Even so, BMW is selling almost twice as many Minis and increasing production of the car, a retro version of an iconic compact. The Mini has been popularized in movies including the remake of “The Italian Job,” while the Smart appeared in new “Pink Panther” films with Steve Martin.
“It’s very difficult for Smart to duplicate the success of Mini,” said Rebecca Lindland, director of auto research at IHS Global Insight in Lexington, Massachusetts. “The primary characteristic of Smart is that it’s small. The primary characteristic of Mini is that it’s irresistibly adorable, with performance thrown in.”
Test Drives
Daimler expects a publicity boost when it rolls out a limited-series electric Smart in the U.S. and Canada in late 2010, and plans a push to get more drivers to test the ForTwo, similar to a 50-city road show in 2007.
The ForTwo, at 8 feet, 10 inches, is more than three feet shorter than BMW’s Mini. Some Americans are reluctant to buy minicars because they are overshadowed on the road by massive pickups and sport-utility vehicles.
“The car is just so tiny in the U.S.,” said Lindland. “I had a Mini and there were friends of mine who were afraid to drive with me.”
Smart’s U.S. appeal also may be suffering because consumers can choose alternatives like the Hyundai Accent, which seats five people and is more than 12 feet long, with a starting price that’s $2,000 less.
Swatch Venture
Smart began as a joint venture with Swiss watchmaker Swatch Group AG. Daimler took control in 1998 after a disagreement over developing a SwatchMobil model. Daimler is now looking for a partner with expertise in small cars to boost volumes and spread development costs, and aims to make a decision by June.
To improve U.S. prospects, Daimler is considering a four- seat Smart after it refreshes the current model. A previous “ForFour” was canceled in 2006 as part of a restructuring that ended production of a roadster and development of an SUV.
“It’s a tough sell,” said Lindland. “They’ve got to be really hopeful that gas prices increase or regulations change. Without that, consumer behavior isn’t likely to shift in Smart’s favor.”
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