Mercedes Sells Half Of Smart To Geely.
“We welcome a discontinuation of Smart as we can’t see how a German micro car business can generate a profit. Costs are simply too high,”
Mercedes’ little Smart cars have been a financial embarrassment for parent company Daimler ever since it was launched in 1998, but its latest iteration as an all-electric Citycar should have proven a lifeline.
As European Union carbon dioxide (CO2) emission regulations tighten and the diesel option is priced out of the market, the next few years should finally have allowed the electric Smart car to flourish. After all, as E.U. politicians force car buyers out of their diesels, there is precious little choice for mass market buyers. The market is crying out for a cheap and cheerful, lightweight electric runabout, but Mercedes apparently doesn’t see this as a workable option.
So a report in the Financial Times that Daimler will sell a 50% stake in Smart to China’s Geely Automobile Holdings Ltd was well received by investors.
Citi Research said the FT report suggested Smart was losing 600 million euros ($700 million) and a disposal of the business “at zero cost” would add 3% to 2019 profit estimates.
Investment researcher Evercore ISI estimates Smart loses between 500 million and 700 million euros.
Daimler has never disclosed the extent of Smart’s losses, but reports just before the financial crisis in 2008 suggested it was losing as much as 4,000 euros ($4,680) per car. To cut costs, Daimler partnered with Renault to make the Smart and Twingo minicar together. Last year Smart sold just under 100,000 cars in Europe, according to carsalesbase.com. Sales peaked at about 145,000 in 2004.
“We would welcome a discontinuation of Smart as we can’t see how a German micro car business can generate a profit. Costs are simply too high,” Evercore ISI analyst Arndt Ellinghorst said.