Mercedes-Benz doesn't seem so smart these days
From all accounts, the adorable Smart ForTwo and its siblings were a smash hit at the Detroit auto show. The eight foot long Smart ForTwo is a hit all over the overcrowded cities of Europe. Just a few weeks ago, I wrote about Smart's fortunes in the US market. At that time, DCX had decided to open around 70 Smart dealers in the US with the ForFour and slightly larger ForMore being the first two Smart Cars to be sold in the US.
Since then, the brain trust in Stuttgart has suspended development of the ForMore and is mulling over its ability to make money with Smart in the US or any other market. Worse, the engineers at Mercedes-Benz can't seem to figure out how to make the engines legal in the US. Frankly, I don't believe that the most self-congratulatory automotive engineering department in the world can't figure this out. Smart meets all EU standards, which are very close to US standards.
Then we learn that ZAP, the alternative energy car company based in Santa Rosa, California, has found a way to sell the ForTwo in 45 states and is working on a way to meet the stringent California rules for the other 5 states. On ZAP's website (http://www.zapworld.com), ZAP states that it has DOT Approval and a Letter of Conformity from the EPA. That alone is pretty impressive.
ZAP has taken delivery of its first two batches of the Smart ForTwo cars and is in the process of converting them now. ZAP has been soliciting wholesale orders from distributors for 100 vehicle lots in Automotive News and probably other trade publications. It's working on 200 vehicles, and I'm guessing that with web orders of around 1,300 (as of today), the demand for these fuel-efficient, cute cars will be high for a while.
Now, ZAP doesn't exactly have a great financial track record. It hasn't made money since inception in 1996. It's still running losses and burning through cash as fast as it can issue new stock or borrow money. There isn't an established dealer network (yet) and the question of service is still largely unanswered. But as we can see, ZAP is working on it.
Just last week, at the National Automobile Dealers Association (NADA) annual meeting in New Orleans, ZAP was there with US-legal Smart cars and is in the process of signing up dealers (although none have been announced yet). Next, ZAP has trotted out the Smart for the media to drive, right here in Santa Ana. I'm sure that will help with some free advertising. And to top it off, ZAP just announced that it has $21 million in orders (not sales) from dealers (none disclosed). I'm sure ZAP's CFO ran to the bank with those orders in hand to borrow whatever it needs to get more vehicles flowing to the US.
And where is Mercedes-Benz with all this going on? First, Mercedes never really intended to bring the ForTwo to the US. It misjudged the "fashion" factor for Smart and it didn't really sense the shift in interest in and demand for high-mileage vehicles. Mercedes and parent DCX have missed the first two generations of hybrid vehicles, so right now, neither Mercedes nor Chrysler offer any hybrid or high-mileage vehicles. Smart could fill that gap.
VW has been selling its diesel Golf and Jetta models in the US for a few years. VW says it sells every diesel it brings to the US. The VW small diesel cars routinely rack up gas mileage in the 40-50 mpg range, tying or trumping hybrids in many cases. But diesels still have a bruised image in the US. Mercedes has great diesel technology. In Europe, Smart now has a small diesel engine, engineered by Mercedes, that gets great mileage in the small, lightweight Smart Cars. There is an undetermined, yet growing market for cute Smart cars to zip around urban streets getting 40-50 mpg and fitting into tight parking spaces. Sure, ZAP likes to advertise that the ForTwo can get up to 60 mpg, but in real world use, it will still get excellent mileage.
Then there is the issue of whether cities will allow ForTwo drivers to park perpendicular to the curb. It wouldn't stick out any further than these mammoth SUVs that suck up so much street space. Could you imagine how popular these cars would be in NYC if you could park your Smart facing the curb? It would only take up about 6 feet of curb; you could park more cars and use spaces no one else could fit in!
Hey, I still think the ForTwo is impractical for cities like LA, which have every public parking space measured and metered. It would, however, be good to park on residential streets that are always jammed. And on street sweeping days, you might actually be able to find a spot when others couldn't.
There is, however, one major, overriding problem with the whole issue of selling Smart in the US. And it is definitely the most important issue. That is price. Neither ZAP nor Mercedes will even hint at what price a window sticker would display. ZAP recently put a ForTwo up for auction on ebay and the auction was halted at $27,000. At that price, the car just won't sell. It's half a car and no matter how cute and good mileage you get, Toyota can deliver a Prius for that price. There are many other cars for that price that would be much more substantial. I think that Smart should be priced around that of a Scion, with maybe a small premium for cute. At $30,000, it's just not going to sell well and the hype and heat will be gone before you can deliver the ones that are ordered.
Mercedes was considering pulling the plug on the Smart exhibit at the Detroit show. They went through with it and it turned out to be one of the freshest, most popular attractions. ZAP, not Mercedes, figured out how to bring the first Smart to the US and has a jump on Mercedes, owner and manufacturer. There is something wrong with this picture. Mercedes needs to learn how to run with the flow of things. Maybe this is the time for Smart to come to the US and maybe Mercedes should embrace Smart's current status as a "hot" car with customers lining up.
