This Smart Car Isn't So Dumb

Suddenly, Daimler's tiny vehicle has lots of company

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 full-size 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 finally starting to show some life, Daimler and other European auto makers are taking a closer look at some of their designers' wildest ideas. That means everything from three-wheelers to vehicles that morph from station wagons into convertible sedans.

Examples will begin appearing in European 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 carlike 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.

BAD REPUTATION. 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. Critics also said the car, with a base price of about $8,800 and top speed of 84 miles per hour, was too slow and too small for the money.

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. 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. There are signs that DaimlerChrysler, which has invested an estimated $1.5 billion in the project, will spend more: Diesel and convertible versions are next.

SNUB-NOSED HATCHBACK. 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. It turned out to appeal to drivers ranging from young singles to retirees, and now accounts for 17% of Renault's sales.

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 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.

As interest in customization grows, the smart may prove smarter than it first seemed. The company can assemble one in just 4 1/2 hours, and its plastic body panels can be replaced in an hour. Analysts once said the smart was too far ahead of its time. Maybe its time is about to come.

Before it's here, it's on the Bloomberg Terminal.