Inside the ground-up, electric reinvention of Smart UK

The new CEO of Smart UK, David Browne, is attempting to answer a question about market positioning: what will the newly reborn brand be in every category it enters? The question requires distilling the brand to its core essence and is a way to discover if the management team has a clear idea of what Smart’s new purpose is. The new Smart #1 compact electric SUV, due in the middle of 2023 as a rival to the likes of the Volkswagen ID 3, is much bigger, at 4.3 metres long, than the Smart Fortwo that’s being phased out over the next couple of years. This begs the question: what does Smart exist for now? Other brands are clear on this. Mercedes-Benz, Smart’s former owner and now a 50% shareholder along with China’s Geely, said recently that its own cars would always be the most luxurious in their sector. Lotus promises to build the best-handling model in every sector it enters. Skoda might say the roomiest or Dacia the best value for money. For Autocar Business webinars and podcasts, visit Autocar Business Live Smart will expand its range beyond the #1 (yes, we do have to say “hashtag”, although the accompanying eye-roll is optional). The number just means it’s the first of the new era, rather than the smallest, so the brand could launch its next cars in either direction. “We’re set up as a multi-product company. There’s a lot more to come from our side,” Smart Europe CEO Dirk Adelmann told the audience at the Financial Times’ Future of the Car conference last month. But what’s the key element that links all future models? Browne offers “true urban companion”, the tagline that Smart has minted for the #1, but refuses to be drawn on a single word to summarise the brand. “It’s difficult to tie it to one specific feature. It’s about distinctive design, it’s about connectivity and it’s how we build that recipe that’s so important,” he said. The Smart name is obviously the same and there’s a link to Mercedes in that the German giant leads the design of the cars, but in most key aspects the #1 is Chinese. It will be built at a Geely factory in the city of Xi’an and sits on Geely’s Sustainable Experience Architecture (SEA) for EVs, which also underpins the first car from the Chinaonly premium brand Zeekr. The Chinese connection is a plus in the EV context, because it usually means decent specifications. The #1 features a sizeable 66kWh battery that’s claimed to be good for a range of 270 miles and offers fairly fast charging rates of 150kW DC and 22kW AC. That stacks up well against the competition in the predicted £32,000- £38,000 price band that the #1 will occupy (no official pricing has yet been given). Smart is deliberately positioning itself as near premium to avoid too much overlap with Mercedes above, so rivals are anywhere from the ID 3 to the Hyundai Kona Electric and Kia e-Niro, says Smart UK’s management. The SEA’s electronics, powered by a Qualcomm system-on-chip, allows lots of software features driven by the cloud. According to Isabela Ribeiro, head of product management and market intelligence for Smart Europe, “70% of the car’s features” can be updated over the air, while the 12.8in central touchscreen is a riot of graphics and information, including an animated fox wearing wellies that responds to voice commands. Your kids will love it. More features can be added over the air, too, including controversially the activation of hardware already built into the car. Ribeiro mentioned the heated steering wheel, which can be used only after payment via the Smart app, and hinted at more to come. The other significant nod to the future comes with the sales model. All cars will be sold directly by Smart, with dealers acting as agents. Customers might not see much difference, but they will be able to choose whether to buy online or at the showroom, experiencing no difference in pricing between the two. “One of the benefits from a customer point of view is consistent, transparent pricing,” said Ribeiro. Smart dealers often operate within a Mercedes showroom, but that might change as dealer groups agree or don’t agree to become Smart agents. The new company may be half-owned by Mercedes, but it’s an entirely different entity, to the extent that any data generated by sales of the Fortwo and larger Forfour is held by Mercedes, not Smart. Smart’s sales figures in the UK have yo-yoed dramatically since the original City Coupé arrived in 1998, twice peaking at 12,000 a year but falling to just 1581 in 2021. The business model has always been rickety, given the two-seater’s combination of a tiny size and a high price (it currently starts at £21,870). The new business model should give more stability. “We’re expanding into a segment that’s 10 times the size of the microcar segment,” said Adelmann at the FT summit. “There we were more or less a stand-alone solution, and it didn’t bring us the profitability we needed to expand into other segments.” It probably doesn’t matter that Smart is currently having trouble redefining itself as a brand. A good design, a competitive electric offering and an easy buying experience could be enough to persuade customers, especially now that it’s playing in a core segment. “Smart has sometimes been ahead of its time, and we paid dearly for it,” said Adelmann. “In a bigger segment, we think we have a better chance.” The new mobility: flexible payment Smart became one of the pioneers of car sharing via then parent firm Daimler’s Car2Go scheme in 2008. While the new Smart said it hasn’t completely given up on the idea of pay-perminute urban car use, it has tempered its mobility ambitions by instead focusing on flexibility with longer-term payment. It has teamed up with French fleet leasing giant ALD (also the owner of Leaseplan as of January this year) to offer a range of finance options. Here, that will mainly mean personal contract purchase, according to Smart UK CEO David Browne. “That’s the vast majority of customer demand. We expect it to be over 80%,” he said. PCP charges a higher price for the option of buying later, compared with straight lease rental. “The UK is different from Europe, where leasing has a bigger share,” said Browne. ALD is pushing into the subscription model with its acquisition last year of Germany’s Fleetpool and is keen to offer Smart customers more flexibility down that route in future, including bundling charger use into the payments. However, Browne cautioned against expecting any quick solution. “Not many people have made money in the last 10 to 15 years [with subscriptions], and we don’t dare to say we’re the ones who can do it,” he said. “Here, we’ve found the right partnerships, so then the customer can decide.” Smart timeline 1998 Smart City Coupé launched, the name combining Swatch, Mercedes and art. 2006 First electric Smart unveiled. 2016 Smart becomes the first combustionengine brand to go all-electric. 2020 Smart owner Daimler inks deal with Chinese giant Geely to create new 50:50 jointventure company. 2022 Smart #1 electric SUV launched in Europe (due in the UK in 2023).