BERLIN (Reuters) - Daimler is betting that cooperation with Renault and the launch of models to tap growing demand for city cars may pave the way for its diminutive Smart brand to become profitable.
Smart will add a new four-seater model to its lineup this year and upgrade the two-passenger Fortwo vehicle, raising hopes by the German group of boosting the brand’s flagging sales.
Analysts including Bernstein’s Max Warburton have said huge development, production and distribution costs of Smart’s first-generation model launched in 1998 inflicted a multibillion-euro loss on Daimler.
“I‘m tempted to say that the multi-billion losses have been shrinking for decades,” Daimler Chief Executive Dieter Zetsche told reporters on Wednesday at Smart’s new product launch in Berlin.
“Following a restructuring seven-eight years ago, Smart hasn’t had a considerable negative influence on our overall business and we now want to turn this into a positive influence,” the CEO said.
“With cooperation partner Renault-Nissan, we’re showing that we can significantly improve the business case” for Smart, Zetsche added, declining to be more specific.
Zetsche said Daimler has halved development costs at Smart following a 2010 cooperation accord with the French small-car specialist, allowing the Smart Fortwo successor, the new four-seater and Renault’s Twingo model to share a joint platform.
The 105-inch (2.7-metre) long Smart ForTwo “microcar” never met ambitious sales targets of as many as 200,000 per year. Deliveries peaked at about 140,000 cars in 2008 and dipped below 100,000 last year.
Together with the 137-inch (3.5-metre) Forfour, a revival of a four-seater model that Smart scrapped in 2006 on poor sales, Daimler’s minicar brand will compete with models such as Volkswagen’s Up!, Fiat’s 500 and General Motors’ Opel Adam.
With urban populations steadily growing, deliveries of city cars may increase 35 percent worldwide by the end of the decade to about 6.2 million, according to research firm IHS Automotive.
“We want to cut out a fair slice of this growing cake,” Zetsche said.
The Smart Fortwo topped a September 2013 list of the 10 “most loss-making cars of modern times” by Bernstein Research which claimed the model was losing 4,470 euros per vehicle.
The successor, due to hit European dealerships on Nov. 22, will cost about 10,400 euros while the four-seater version will be priced at about 11,000 euros, Smart brand chief Annette Winkler said.
($1 = 0.7387 Euros)
Reporting by Andreas Cremer; Editing by James Dalgleish