Go to the Globe and Mail homepage

Jump to main navigationJump to main content

smart fortwo ed (Daimler AG - Global Communicatio/Mercedes-Benz)
smart fortwo ed (Daimler AG - Global Communicatio/Mercedes-Benz)

Brand strategy

A green future for Smart? Add to ...

You see these funny little car2go runabouts put-putting around trendy, totally urban neighbourhoods here on the West Coast like Yaletown, the West End and Kitsilano. Car2go’s Smart fortwo microcars are rolling billboards for not only Vancouver Mayor Gregor Robertson’s vision of Vancouver as the greenest city in the world by 2020 – that means a city largely car-free – but also for the latest Daimler AG vision for the future of its long-ailing Smart car division.

More Related to this Story

Yes, Daimler’s smart brand is still alive and it has found a home in an idea pioneered in Vancouver and Austin, Tex. – car2go, the car-sharing business that charges members $0.35 a minute to rent a fortwo. If you want this itty-bitty two-seater for an hour, it’s $12.99, and a day costs $65.99.

Surprised that Smart has found yet another least on life? I certainly am. In the middle of 2011, when U.S. billionaire Roger Penske pulled the plug on his Smart adventure after just 3-1/2 years, I thought that was it for Smart not just in the United States, but in Canada, too, and surely around the world.

Penske, who operates more than 300 vehicle franchises in the United States and other countries and has all sorts of other interests, is a hugely savvy guy, the kind of moneybags operator who knows when to pack in a bad business before it becomes a monumental problem and starts dragging down his bigger organization.

Last year, Smart sold only about 90,000 cars worldwide, which is a far cry from the 150,000 minimum in annual sales originally envisioned by Daimler back in 1998 when the brand was launched. The United States? Well, Smart sales hit 24,622 cars in 2008 when gas prices briefly surged to $4 (U.S.) a gallon. By 2010, U.S. consumers bought 5,927 Smarts. No wonder Penske ran up the white flag.

As for Canada, Smart is run through Mercedes-Benz Canada so it’s not so easy to call it a day and send Smart packing. Nonetheless, last year, Smart sales fell 8.3 per cent to 1,851 and they have been in steady decline for years. So far in 2012, Smart sales are down again, this time by 11.6 per cent.

Smart obviously needs a new rescue plan. Stubborn old Daimler has one, too. Despite losses that we hear count in the billions, Smart soldiers on. In its latest iteration, however, Smart is emerging as Daimler’s “green” brand and this idea might even work. The lone Smart, the two-seat fortwo, is in the words of Daimler officials, “the green spearhead of the Mercedes-Benz cars portfolio.” Smart, we’re told, is a green, premium lifestyle brand.

“We absolutely have the perfect urban vehicle, an intelligent urban solution,” says Mercedes-Benz Canada president and CEO Tim Reuss.

Intelligent as it is, Bloomberg reports that Jürgen Pieper, an analyst with Bankhaus Metzler in Frankfurt, estimates Smart’s current annual losses at about €100-million, though Daimler does not break out the earnings of individual brands. Sanford C. Bernstein analyst Max Warburton, adds Bloomberg, estimates that Smart has cost Daimler more than €4-billion in losses over the past 14 years.

Smart has been bleeding Daimler’s shareholders not only because the sales volumes are meagre and not likely to grow dramatically in the near future, but also because the fortwo is really quite a sophisticated car – and thus an expensive one to engineer and build. The fortwo is something of an engineering marvel.

Small as it is, the fortwo’s body structure is robust enough to withstand all sorts of incredible crash forces. The semiautomatic gearbox is also advanced enough to claim inspiration from Formula One racing cars. There is also a modern stability control system and a marvelous little 1.0-litre turbocharged motor rated at 70 horsepower.

Now, 70 horsepower doesn’t sound like much power, until you realize the basic $14,350 coupe version (there is also a convertible fortwo starting at $20,500) weighs just 820 kilograms. The car itself, while boasting a surprising amount of cargo room and loads of space for the two passengers, is only slightly bigger than an old-fashioned telephone booth.

If that sounds like the ideal car to share/borrow/rent for a few minutes in a congested city like Vancouver, you’d be right. Thus, we have car2go Canada Ltd. After a year of operations here, car2go has, says the company, more than 15,000 registered members (it costs $35 to become a member if you qualify, though that fee has been waived on occasion to spur business).

That’s a far cry from 2011 when car2go launched with 225 cars and its 2,000 members were making an average of 1,500 trips per week, says the company. The fleet has grown to 320 car2go-edition Smart fortwo vehicles, every one logoed and painted blue and white. The 15,000 Vancouver members, the company claims, are taking an average of 12,000 trips a week in the expanded car2go Home Area of 70 square kilometers.

Vancouver mayor, Gregor Robertson has said that car2go car-sharing is one of the new forms of urban transport that makes it “easier for citizens to get around our city," the second-most congested city in North America behind Los Angeles, according to the Tom Tom Congestion Index.

Indeed, the car2go idea is well considered. Car2go members can pick up and drop off a fortwo anywhere within the city’s boundaries. The availability of cars is shared via a smartphone app or other means, and the cars themselves are parked in designated spaces. The venture has become successful enough to warrant expansion to Toronto in June and Calgary in July. If nothing else, boosting the car2go fleet can only help sell a few more fortwo cars that would otherwise languish on dealer lots.

The next step for car2go also represents the future of smart. That is, the car2go fleet is expanding to include smart fortwo electric-drive vehicles. If you’re thinking about buying a $26,990 fortwo EV, car2go might be the best possible way to take an unhurried, hassle-free test drive (the fortwo EV cabriolet starts from $29,990). While fortwo EVs are meandering into the car2go fleet, the first cars won’t be delivered to retail customers until next spring – though the company will take your order now. Smart’s EV offers are also set to include the Smart ebike ($3,240) with its electric power assist.

The fortwo EV is really quite a nifty development. Not only will it be the least-expensive EV in mass production, it might be the most entertaining to drive and its fits perfectly with Smart’s new “green” mandate.

This EV is agile and quick. Rated at 96 lb/ft of torque, the 55 kW electric motor moves this fortwo from 0 to 60 km/h in just 4.8 seconds. Top speed is 120 km/h, says the company, and the Smart people say their 17.6 kWh battery gives the car a range of 145 kilometres. And even the most basic version comes with lots of upscale features: air conditioning, power windows, heated seats and electrically adjustable heated mirrors, as well as stability control and an anti-lock braking system.

So Smart’s latest mandate is to get some love from urban dwellers who see cars as nothing more than an occasionally necessary evil that should be tolerated and shared, but not owned, God forbid. Smart, we’re told, will be the home of Daimler’s city cars and, apparently, electric bikes and more.

There could very well be a future here for Smart. According to Bloomberg, IHS Automotive forecasts a 29 per cent increase in the sale of “city-savvy” subcompacts around the world by 2015. Smart will help Mercedes-Benz meet ever-toughening fuel efficiency and emissions rules. Smart, suggests Canada’s Ruess, will be a place where future Mercedes’ customers have their first Daimler experience. Smart is the entre into the Mercedes brand, he says.

Could it be that the “green” movement is the savior of a car brand, of the Smart brand? There’s irony there and perhaps Daimler will find profits for the first time, as well.

jcato@globeandmail.com

Follow on Twitter: @catocarguy

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories