Analysts Say This Little Car Is Going to Sell Big (at First)

Smart May Find It Has Limited Appeal in U.S. After First Year

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DETROIT (AdAge.com) -- Are SUV-loving Americans ready for the Smart Car?

Even though the micro-vehicle is rather odd-looking, seats only two and tops out at 91 mph, it will be a hit -- at least for a while -- after it hits the U.S. market in January, auto experts predict. But they question its long-term outlook.
Knowing U.S. consumers had safety questions, Smart went on tour to show off its rebuilt body.
Knowing U.S. consumers had safety questions, Smart went on tour to show off its rebuilt body.

The timing is good here for Smart due to increased environmental awareness and fuel efficiency, said Vic Doolan, nonexecutive chairman of consultant Courland Automotive Practice, former president-CEO of Volvo Cars of North America and ex-president of BMW of North America. (Smart is designed to deliver 40 miles per gallon, and the brand was an "official global partner" for Live Earth.) Mr. Doolan said another plus is that savvy auto magnate Roger Penske is the U.S. distributor for Smart, which is owned by Germany's DaimlerChrysler.

Small start
Still, Mr. Doolan said he believes annual volume won't be much more than 20,000 units. "I think they'll be happy with that," he said, before adding that sustaining sales after year one will be difficult.

David Schembri, president of Smart USA, won't say how many cars the company hopes to sell in the U.S., but he said "well over 20,000" people have made reservations via smartusa.com for $99 to buy the model it's calling "ForTwo." And he conceded the Smart car isn't for everyone: The marketer is targeting what it calls "the creative class," or early adopters who aren't defined by age or household income. "This provides a marketing challenge," Mr. Schembri said.

He said the "the first question people ask is 'Is it safe?'" To convince them, Smart's showing off its reinforced body skeleton on a road tour to 50 cities. The so-called Tridion Safety Cell protects occupants by deflecting crash damage under the car. The cage will also be displayed in all of Smart's 60 to 70 dealers at launch. "Since a micro car has never been in the USA, we need to address this upfront," Mr. Schembri said.

No U.S. agency
But it won't be doing so in TV ads. Mr. Schembri has no plans for traditional media, relying instead on the road show and online reservation program to get prospects into the cars. The Smart website was designed in-house, although Smart borrowed TV ads from other countries that can be seen on its site. There is no U.S. agency handling the brand.

Wes Brown, VP of auto consultant Iceology, said the brand has a youthful, fun personality that should be popular with college students, urbanites and train commuters. He predicts fashion-conscious people will be early buyers, with more prospects coming onboard after seeing the car on the road.

Smart's affordable price should also appeal to younger consumers. Mr. Schembri told Advertising Age he expects the well-equipped Passion Coupe fortwo, selling for under $14,000, to account for more than half of total sales. He predicted the under-$17,000 Passion Cabrio convertible will account for around 40% of sales. The base Pure fortwo, which will be sold for less than $12,000, is expected to pick up the remaining percentage.

Tom Libby, senior director-industry analysis at the Power Information Network, said after Smart's initial launch excitement and enthusiasm, the brand will become a niche vehicle like BMW's Mini Cooper.

Although he declined to project annual volume, he predicted the two-seater Smart would sell fewer than the four-seat Mini. "There is a market for Smart, but it's limited."
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