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Daimler seeking Chinese partner to keep Smart alive

Daimler seeking Chinese partner to keep Smart alive

Executives will decide whether to keep the brand alive by 2020.

The Smart brand's future remains dangerously in limbo. Parent company Daimler will decide whether to approve the development of a fourth-generation ForTwo, which would need to be done with a partner, or whether to deep-six the under-performing brand by the end of 2019, according to a recent report.

The original Smart was presented as the City Coupe during the 1997 Frankfurt auto show. It gathered an immense amount of attention from the public and the press, but converting headlines into sales is easier said than done. Smart has persistently lost money over the past two decades, and the ForTwo has never reached its sales target of 200,000 units annually. Even a money-saving tie-up with Renault may not be enough to justify the investment needed to keep it afloat.

Annual sales dropped to about 130,000 units globally in 2018, a decline partially blamed on the company's American division's decision to ditch gasoline engines in order to go all-electric. It consequently lost two-thirds of its dealer network. Its European arm will follow the same path in 2020, and sales will likely drop again. In Germany, the ForTwo starts at 11,615 euros. The electric model is priced at 21,940 euros, which makes it more expensive than an entry-level Honda Civic.

These figures paint a grim picture of Smart's future. German newspaper Handelsblatt learned executives will decide what to do with the Smart brand before 2020. If the brand stays alive, it will need to find a partner to help off-set the cost of developing a fourth-generation ForTwo. Renault isn't interested in extending the agreement, and decision-makers are looking to China.

The publication added executives are talking with BAIC, Daimler's local partner, and Geely, a firm which owns a 9.7-percent stake in the German firm. They're seen as the most likely saviors of the Smart brand. It's unclear what they would bring to the project, with the notable exception of relatively cheap labor. Any tie-up would move Smart production out of France and send it to China. The Hambach factory that has built the Smart for 20 years will soon begin making an electric Mercedes-Benz compact model, so no jobs will be lost if the ForTwo becomes Chinese.

The retirement of Daimler CEO Dieter Zetsche means Smart needs to prove beyond a doubt that it can earn its keep in order to survive. Zetsche has always backed the brand; his successor, Ola Kallenius, sees it more as a money-losing liability than an asset. He wouldn't think twice about killing the brand if it made sense from a business standpoint, an insider told Handelsblatt. No one at Daimler has commented on the firm's future, but we expect to learn more in the coming months.

Note: Smart Forease Plus concept pictured. Photo by Ronan Glon.