China's Geely buys 50% stake in Smart from Daimler

The city car brand has found its savior.

Daimler's search for the Smart brand's savior is over. The company announced it formed a joint-venture with China-based Geely, its largest shareholder, to develop the fourth-generation ForTwo and expand the Smart brand's portfolio of models by taking it into more lucrative segments of the market.

When the joint-venture is finalized in late 2019, Daimler and Geely will each own a 50-percent stake in Smart. The financial terms of the deal haven't been made public yet, but both parties applauded the partnership. Mercedes-Benz will design the next-generation model, while Geely will provide its engineering expertise to the project. In other words, it will have a Mercedes-styled body and Geely guts.

The next-generation Smart will go on sale in 2022. Offered only as an electric car, it will be assembled in a brand-new, purpose-built factory located in China. Details about the facility -- such as its location -- haven't been released yet. The Chinese plant will build Smart cars for every global market, including Europe, but the Hambach, France, factory that currently makes the model won't suffer from job losses. It will benefit from a 500-million euro investment, and in the coming years it will begin producing an electric Mercedes-Benz compact model inspired by the EQA concept car unveiled at the 2017 Frankfurt auto show.

Neither party commented on what the future holds for the ForFour, which is made by Renault alongside the Twingo in Slovenia. However, they're both committed to expanding Smart's presence by taking into the B-segment. Achieving that goal will require developing a four-door, four-seater model in the vein of the Ford Fiesta and the Volkswagen Polo, the segment leaders on the European market.

The B-segment car will mark the beginning of a broader model expansion. Writing on Daimler's official blog, outgoing company CEO Dieter Zetsche alluded to "new models" and "entry into new segments." It's too early to tell whether any of the future models Smart is planning on releasing will be sold in the United States, where sales can be nicely described as catastrophic.

The tie-up puts an end to the frequent rumors claiming Daimler planned to deep-six the Smart brand at the end of the current ForTwo's life cycle. The model was developed jointly with Renault, but the Paris-based firm wasn't interested in continuing the partnership. The deal also places Smart under the same Geely-branded umbrella as a growing list of automakers including Lotus and Volvo.

Time will tell how Renault will replace the third-generation Twingo. Rising costs and wafer-thin profit margins will most likely prevent the company from designing the model on its own. It will need to find a partner to split development costs.

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