After One Year, Still Smarting

The junkyards are littered with import automotive brands that didn't make it in the United States: Peugeot, Renault, Daihatsu, Sterling, Rover, MG, Austin-Healey. That's not a complete list, but it tells you of the proud overseas names that have foundered on the shoals of the demanding American market.

Into this potential abyss came Smart USA, the distributor of a foreign brand that had a chequered history. With its genesis as the Swatch mobile, the Smart brand was the brainchild of Swatch CEO Nicolas Hayek, who sought to bring to the automotive world what his company had brought to timekeeping -- an inexpensive, stylish product designed for the sensibilities of the youth market. Mercedes-Benz signed on to co-design and market the line of vehicles, and the Smartville factory was established in France in 1994. Smart launched in Europe in 1997 and had a respectable opening run, but after the initial glow, its sales began to peter out. A couple of models -- the Smart Forfour and Roadster -- were dropped, and development was halted on the promising compact SUV, the Formore. By 2006, Swatch had long since bailed out, and the dwindling fortunes of Smart forced liquidation, with Mercedes-Benz absorbing what was left -- essentially the production of the mini Fortwo model. As the saga unfolded, it looked, at times, as if a U.S. introduction of the car was imminent, but each time, efforts were halted before the vehicle could be sold in America.

If any launch was preceded by inauspicious signs, it was the U.S. launch of the Smart, which finally came to fruition just one year ago. Yet despite all the nay-saying and gloom surrounding it, the Smart Fortwo experienced a robust first year of sales in the United States, crossing the landmark 20,000 sales milestone in October -- just nine months after going on sale. Seemingly against all odds, the United States has become the third largest sales market for the Smart Fortwo, trailing only Germany and Italy.

“The key to Smart USA's success has been entering the market with the right car at the right time,” said Dave Schembri, president of Smart USA. “Consumers throughout the United States have enthusiastically embraced the Smart Fortwo as well as the concept of the microcar. The Fortwo now has become part of the landscape of America's highways.”

The effort has been far from easy, but Smart has taken a new approach to national distribution. As part of mega-retailer Penske Automotive Group, it opened over 70 Smart center retail outlets in 35 states across the country this year. The strategy was placing retail outlets in major cities to reach consumers desiring urban mobility, a strong suit of the tiny Fortwo, but the company also located Smart centers in cities like Omaha, Neb., and Jackson, Miss., due to high customer demand and acceptance in areas not normally known as hotbeds of the urban lifestyle.

Of course, timing couldn't have been better for the Fortwo launch, since this year was marked by a fuel price spike that sent consumers scurrying for small, fuel-efficient cars. The Fortwo was recently ranked the most fuel-efficient, non-hybrid vehicle in the United States by the U.S. Environmental Protection Agency's 2009 Fuel Economy Guide, and the guide cites the Smart Fortwo as fifth overall in the rankings for fuel efficiency. The vehicle is also classified as an “Ultra-Low Emission Vehicle” by the California Air Resources Board (CARB).

On the marketing front, Smart USA challenged conventional wisdom of how cars are marketed and sold in the United States. Nearly a year before the sales launch of the Smart Fortwo, an online reservation system was created for interested consumers to take the first step in the ownership process by reserving a production model for a fee of $99. This system allowed Smart USA to gauge preliminary vehicle demand, the ratio of trim and color preferences, and the location of the customer base. It proved so useful that the reservation system continues to help the company manage vehicle demand. Placing a reservation is only way a customer can guarantee an opportunity to purchase a vehicle, although drop-ins to Smart centers also help to find a vehicle ready for purchase. Instead of using traditional (and very expensive) advertising, Smart has relied on grassroots efforts like cross-country road shows and word of mouth to communicate the brand's attributes and ultimately register sales.

What the future holds for Smart in the U.S. is anybody's guess, but no one can deny the impressive achievement the brand has made in selling more than 20,000 minuscule two-seaters to a largely skeptical American public.