The Small Car With a Rather Big Problem

Remember back in 2005 and 2006 when Mercedes was making plans to bring the smart car to the U.S.? The car was a hit in Europe and it became fashionable for people to say, "Why don't they bring that car over to the U.S.? there are tons of people who want a compact car like that."

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I remember those days. Whenever I would say, "I'm not sure that car is going to be the smash hit you think it will be" people would scoff and tell me I needed to get a clue.

I'm thinking of those days as I watch smart struggle with declining sales, mounting losses in the U.S. and a dealer network, Penske Auto Group, that no longer wants to sell the pint size car.

Last year, smart sales plummeted 59%. 59%! Keep in mind, last year U.S. auto sales as a whole jumped 11.1%.

The plunging smart car sales may explain why Penske says smart USA generated an after tax loss of $15.9 million last year. No doubt a factor in Penske dropping smart and smart dropping plans for a five door model.

So why am I bringing this up? To gloat and say, "I told you so" to those who scoffed at my skepticism about Smart in the U.S.? No. As a matter of fact, I'm disappointed to see Smart struggling. As a fan of the auto industry, I personally believe it's better to have as many options and choices as possible.

And yes, I do think there is a place for subcompact cars in the U.S. Look, MINI (sales up 1% last year) has shown there is a market for very small cars, and Fiat will soon join the game with the 500 model.

But make no mistake, there is a limited market for these cars. And in a limited market, there's only room for so many players. Will smart be able to keep up with MINI and fend off Fiat? This next year will be perhaps its most challenging. Sales of the smart car will soon go through Mercedes-Benz dealers.

Publicly, they will endorse the idea of selling entry level cars. Privately, I'd love to know how many Mercedes dealers will truly invest the resources smart needs if its going to come back in the U.S.

And yes, I still believe that there is a limited market for subcompact cars in the U.S. We grew up on big cars powered by cheap gas. For many people, especially those in rural America, the idea of zipping around in a tiny car is absurd. I believe they will continue to feel that way even if gas prices go up.

The smart car isn't dead in the U.S., but it definitely needs help if it's going to revive itself."


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