Daimler AG (DAI)’s Smart brand plans to introduce more models and expand its sales network in China as the producer of two-seater compact city cars seeks more orders in a market dominated by SUVs and minivans.
The maker of Mercedes-Benz cars plans to bring to China an electric version of its two-seater Smart Fortwo and a new four-seater being developed with Renault SA (RNO), head of Smart Brand Annette Winkler said in an interview. Smart expects to boost annual sales in the nation by 15 percent annually, on average, in the next few years by tapping demand in cities with a population of more than one million, she said Aug. 10.
“There are 160 cities with more than one million people, and many of them lack parking space, have high density and are culturally very open,” she said in Nanjing in eastern China. “All this fits together.”
Daimler is betting enough demand exists in the world’s largest auto market to boost sales for the 1-liter Smart Fortwo, even as its starting price of 115,000 yuan ($19,000) can buy three locally produced Chery QQ cars equipped with same-sized engines. Growth in demand for sport utility vehicles and minivans have outpaced the overall industry as Chinese buyers sought more space and associated size with safety.
“The market environment is difficult for small cars,” said John Zeng, Shanghai-based managing director of researcher LMC Automotive. “In China, big trucks drive aggressively. Parents are worried about their kids driving a very small car on the road.”
Daimler Chief Executive Officer Dieter Zetsche, who has vowed to retake the top premium automaker position by 2020, said the company has to turn around its struggling Chinese operations to catch up with Bayerische Motoren Werke AG and Volkswagen AG (VOW)’s Audi. Bankhaus Metzler estimates the Smart brand accumulated more than 1.5 billion euros ($2 billion) in losses since its introduction in 1998.
Smart plans to have 100 sales outlets in about 75 Chinese cities by the end of this year, compared with 88 showrooms in 68 cities now, Winkler said.
Sales in China last year surged 45 percent compared with the 6 percent worldwide. Winkler declined to say when the new models, including an electric scooter, will be introduced in the country.
China, already the brand’s third-largest market, is set to become its biggest, Winkler said, without specifying when. She declined to describe the typical Smart buyer in China beyond saying he or she is “young at heart,” or which demographic groups that the automaker will target.
Smart has sold more than 40,000 cars in China since introducing the vehicles there in April 2009, the company said. The nation accounted for 15,680 units, or 15 percent of the brand’s global sales of 105,700 vehicles last year.
For Daimler, which doesn’t break out Smart’s earnings, the small vehicle brand has given the company access to younger buyers and allowed the carmaker to meet carbon-dioxide emission restrictions. Smart started as a joint venture with Swatch Group AG, which sold its holding shortly after the brand was introduced.
Long Yi, a 24-year-old private equity firm employee, who bought her Kobe Bryant special-edition Smart in 2010, said she was attracted by the car’s diminutive size.
“For a girl like me, it’s more convenient,” said Long, who had driven almost 500 kilometers (300 miles) from her hometown to see Bryant at the Smart event in Nanjing. “It is easy to maneuver and consumes little fuel.”
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