Smart's Success Leads to Caution

The smallest kid on the block is willing to stay that way for a while.

Smart, a Daimler-Benz subsidiary, has sold about 17,000 ForTwos since launching the tiny two-seater in the U.S. in January. Yet 30,000 potential buyers are still on waiting lists.

Even so, the automaker has no intention of boosting output to bring supply in line with demand, says Smart USA president Dave Schembri, who says auto graveyards are littered with companies that reacted too soon with too much.

“Only a year ago we didn’t have a car or a dealer in the U.S.,” he said. “We can grow volume, but we want to make sure we have everything in place first before we expand. Profit margins are relatively thin on a small car, so we always want to be one car short.”

Essentially, a supply/demand imbalance allows dealers to sell each car for full list price.

If a consumer orders a car today, “it will be sometime in 2009 before he takes delivery,” Schembri said, adding that in some cases customers may have to wait 12 months.

But, he said, even with 30,000 people on the “reservation list” after handing over $99 to order a car, anything can happen.

“Things change during the wait, and if you walk into a dealership you may be able to pick up a cancellation,” he said. “About 20% cancel during the wait, so it’s a good chance you can get one without waiting that long.”

Schembri also says Smart has no plans to expand its lineup to add models other than the two-seat ForTwo, which is offered in coupe and convertible versions.

“The ForTwo is what makes Smart smart and unique, and we have no plans for more than a two-passenger car,” he said. “If we add more seats, we’d simply be like a number of other cars in the market.”

Smart used to offer a four-door in Europe, but it no longer does. It only markets the ForTwo in world markets.

That’s not to say, though, that Smart is sitting on its hands.

“We do have plans to expand the lineup with fuel derivatives, and [we] have a plug-in electric that’s undergoing testing in London now that we expect to produce in 2010,” he said. “We haven’t decided where to introduce it first, though at some point in the future we’d offer it in the U.S. We also have a gas/electric hybrid in Europe, but it’s a mild hybrid that only shuts off at idle and then restarts again, and with the mileage we get on our gas car here (33/41 mpg city/highway), the added cost doesn’t justify bringing the hybrid here.”