Image source: Duge

Photographed at the Shanghai Auto Show in April 2023

To gain more market share, smart, which focuses on small cars, has had to make its cars larger and even started making 'square boxes'.

Recently, smart Spirit #5 officially started presales with a starting price of 245,000 yuan. Positioned as a pure electric mid-sized SUV, the new car features a round shape with a touch of ruggedness. This is the largest model released by the brand so far, with dimensions of 4705/1920/1705mm and a wheelbase of 2900mm, significantly larger than previous models.

By choosing to change its existing image at this time and enter the mid-sized SUV market, smart is undoubtedly aiming to gain a larger market share. Third-party data shows that from January to August this year, smart Spirit #1 and Spirit #3 sold only 13,400 and 4,598 units in China, respectively. However, its sales target for the domestic market this year is 50,000 to 60,000 units, and the likelihood of achieving this target is slim.

Currently, smart Spirit #5 has become the brand's new hope for breaking into the mainstream market. However, the brand's previous tags of 'compact,' 'exquisite,' and 'agile' are deeply ingrained in consumers' minds. Will consumers accept a suddenly 'large and square' smart?

1

Trapped by the small car label ●

In the development of the automotive market, we have observed that many brands tend to be conservative in breaking through innovations due to their inherent labels and achievements, giving competitors opportunities to overtake. smart is one such representative brand, both succeeding and failing with small cars.

According to information, smart was originally founded in 1994 by Mercedes-Benz and the Swiss watchmaking giant Swatch. At the time, Nicolas Hayek, CEO of the Swiss SMH Group (Swatch), had a dream of creating a compact car that could navigate through the metropolis. After several setbacks, he reached an agreement with Mercedes-Benz.

Based on Hayek's vision, smart developed models that were suitable for urban environments for many years. For example, the first mass-produced model, the smart city coupe (renamed smart fortwo in 2004), debuted at the 1997 Frankfurt Motor Show. Its compact size, just 2.5 meters long, was shorter than the wheelbase of some sedans.

However, this did not affect its popularity. With its unique compact design, convenient parking, and premium heritage from Mercedes-Benz, smart models quickly gained favor among urban residents and acquired labels such as 'two-door, two-seater,' 'fashionable,' 'individual,' and 'compact,' becoming a globally renowned compact and refined urban vehicle.

Data shows that in 2002, just four years after its official launch, smart broke sales records by selling 150,000 units globally and achieved a sales revenue of 1 billion Deutsche Marks for the first time.

In 2009, smart officially entered the Chinese market and also started smoothly, selling over 4,000 units in its second year, a year-on-year increase of 119%. From 2009 to 2014, smart fortwo's annual average growth rate in the Chinese market was as high as 89%, with cumulative sales reaching 55,000 units, making China the brand's third-largest market globally.

However, the market is unpredictable, and consumer aesthetics are not static. In recent years, the domestic A00 segment market has continued to shrink, and consumers are increasingly preferring large, comfortable, and intelligent new energy vehicles. This has squeezed the survival space of the previously cute and compact smart, leading to declining sales.

According to available data, smart sold nearly 130,000 units globally in 2018; however, by 2021, global sales had dropped significantly to just 38,500 units.

In this situation, change is imminent. It was during this decline that Geely Holding Group and Mercedes-Benz announced that they would form a global joint venture for the smart brand, each holding a 50% stake. With the establishment of the joint venture, smart underwent a comprehensive renewal, including its brand, products, and D2C direct sales agency business model, in an attempt to shed its past labels.

2

Bigger and bigger products ●

In the vision of the global joint venture, it is hoped that smart can be reinvented as a new high-end electric smart car brand in line with the general trend of new energy development. In recent years, it is evident that smart has been resolute and serious in its transformation efforts.

From a product perspective, the most significant change has been the increasing size of the vehicles. The first model, smart Spirit #1, officially launched in June 2022, was designed with dimensions of 4270/1822/1636mm and a wheelbase of 2750mm. While retaining its refined qualities, it abandoned the A00-class positioning and was instead crafted as a compact SUV.

smart Spirit #3, officially launched in June last year, is the second model in the smart pure electric family. With dimensions of 4400/1844/1556mm and a wheelbase of 2785mm, it offers even more spaciousness. At the time, there were doubts that smart Spirit #3 was simply an enlarged version of Spirit #1.

Then, in September this year, smart introduced the smart Spirit #5, a luxurious, all-electric, five-seater mid-sized SUV, with dimensions of 4705/1920/1705mm and a wheelbase of 2900mm. Its wheelbase is longer than that of the Highlander, and its length is close to that of the Tiguan L.

This new car is said to be the 'benziest' smart ever, as it breaks away from the previous image of smart products being compact city cars and embodies the slogan 'versatile and adventurous design,' even drawing comparisons to the Mercedes-Benz G-Class. In the words of the company, Spirit #5 is a smaller version of the G-Class.

Such a change has undoubtedly surprised consumers. In response, Tong Xiangbei, CEO of smart brand global company, said that 'not being defined' aligns with the brand's tone.

He stated, 'smart has made four-seaters, sports cars, and even E-bikes. In the past, it was said that smart had no soul without two seats. Now everyone is guessing in which direction smart will develop – will it get bigger or more square? They always try to find our pattern, but if they guess it, it's not smart anymore.'

Zhang Mingxia, CMO of smart brand global company, admitted in an interview with the media that the reason for making bigger cars is to gain a larger market share. smart is not equal to small; mid-sized SUVs are more mainstream.

Yi Han, CEO of smart China Marketing Company, also said that this is an adaptation to the increasing and changing needs of the user group. While the previous two-seater smart was a unique addition to the transportation lineup, it also suffered from a narrow customer base. It is hoped that Spirit #5 can double the brand's sales.

It is not unreasonable for smart to aspire to expand its brand boundaries and enter the more mainstream mid-sized SUV market, rather than being limited to its previous positioning as a compact and refined car. However, it is worth considering that bigger cars do not necessarily equate to higher sales.

3

What are the odds of success? ●

Currently, smart Spirit #5 has just started presales, and its official launch will be on October 27. Therefore, it is difficult to predict its future sales performance, but achieving the 'doubling of brand sales' mentioned by Yi Han may be challenging.

I remember when smart Spirit #1 officially started taking orders in June 2022. Tong Xiangbei recalled that night, saying, 'I basically didn't sleep much that night. Our team was amazed by the enthusiasm of our fans.' It is reported that the new car received more orders in just two days than its annual production capacity for 2022.

However, this enthusiasm did not last long. According to data revealed by Zhang Mingxia in a later interview, smart Spirit #1 delivered a cumulative total of 21,909 units in China from its official delivery in September 2022 to March 2023, averaging less than 4,000 units per month.

According to the latest data from Dongchedi, smart Spirit #1 sold only 2,826 units in August this year and as few as 470 units in February. It is not difficult to understand that compared to compact SUVs like Aion Y and BYD Yuan PLUS, smart Spirit #1 is not competitive in terms of configuration, power, range, and price, resulting in significantly lower sales.

Compared to smart Spirit #1, the results for Spirit #3, launched in June last year, are even worse, with monthly sales in the last six months reaching only three digits, peaking at 886 units in June.

It is worth noting that to boost sales, smart has even 'lowered its profile' this year, shifting from 'maintaining brand value and not participating in price wars' to 'actively offering discounts to customers' in an attempt to 'trade price for volume.'

On April 14, smart announced the renewal of its smart Spirit #1 and Spirit #3 product lines in the domestic market. Among them, smart Spirit #1 launched the Agile Standard Edition, Agile Long-Range Edition, and Agile Luxury Edition, with an official retail price starting at 154,900 yuan. Spirit #3 introduced the Stylish Standard Edition, Stylish Long-Range Edition, and Stylish AWD Edition, with a retail price starting at 164,900 yuan.

The starting price of the 2024 smart Spirit #1 was 199,900 yuan when it was launched, and the starting price of smart Spirit #3 was 209,900 yuan when it was launched in June 2023. This means that the starting prices of both renewed models have decreased by 45,000 yuan. However, despite some improvement, sales have not significantly increased.

Now, smart Spirit #5 has become a new hope. In Zhang Mingxia's view, the launch of this model is not only significant for the brand but will also play a crucial role in boosting overall sales, as the mid-sized SUV market is more mainstream.

However, the intense competition in the mid-sized SUV market is well-known. Focusing on the electric mid-sized SUV segment, Tesla Model Y, BYD Tang DM, NIO ES6, and SL03 still occupy a large market share. With a relatively weak sales foundation, what can smart rely on to stand out in this crowded market?

smart's sales target for this year is 50,000 to 60,000 units, which is not a target that would bring it from a niche to a mainstream position. However, even for smart itself, achieving this target will be challenging.

Author | Li Li

Source | CarVisibility

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