FRANKFURT -- DaimlerChrysler is considering launching its small Smart ForFour hatchback in China, the company said late on Thursday, despite local buyer tastes that tend to prefer large sedans.
By the end of the year, the German-American carmaker said it will conclude a feasibility study over whether to roll out the company's struggling compact brand in what has been until recently the world's fastest-growing car market.
"There simply will have to be a trend to smaller cars," Daimler's research and technology chief Thomas Weber told reporters during a dinner.
Weber added that from a technical standpoint the Mercedes A class should also enjoy "tremendous potential" in China as well, but said there were no plans to commission a feasibility study for the smallest model within Daimler's luxury brand.
A Smart launch would come as a surprise, particularly since Volkswagen chief Bernd Pischetsrieder criticised the decision to sell its Polo subcompact in China as "completely wrong".
Significant losses at the Smart brand, most famous for its ForTwo microcar that resembles a colorful crate on wheels, shocked investors by dragging profitability at the Mercedes Car Group below that of its U.S. sister Chrysler in the third quarter.
While Daimler finance chief Manfred Gentz said all options would be considered when deciding on the future of the brand, the company later denied that it would shut Smart down.
"Smart fulfills all the requirements for success in the market," Weber said. "It just needs time to prevail."
The Daimler management board member also said the company would invest heavily to improve the quality of its vehicles.
"We've reached the level where the number of mistakes per hundred cars due to electronics has matched that of the mechanics," he continued, saying the mistake quota in electronics had previously been much higher.
"(Mercedes chief) Eckhard Cordes and I have made quality an absolute priority for Mercedes."
Weber denied the brand's quality ratings were suffering due to poor engineering, though.
"U.S. customers aren't complaining about the motors, but rather about the number of cupholders in the car," he said.
Despite missing the trend toward first-generation diesel particulate filters, Weber said Daimler had been at the forefront of the safety trend by introducing electronic stability control programs in the S class in 1995.
According to Weber, Chrysler will now offer stability control either as standard or optional equipment in all newly launched models.
Speaking about the chances for success for diesel-powered cars in the United States, Weber said he was convinced of it due to the advantages of higher torque and better fuel efficiency.
"A 20 percent market share is definitely reachable in the next 10 years," Weber said, adding that diesel drivers will get a huge boost by the commitment of oil companies to build up a U.S. diesel refueling station network that spreads across the country.
"If diesel enjoyed the same market share in the U.S. as it does in Europe, then the U.S. wouldn't have to import oil," Weber said, confident that the new diesel technology would fulfill even California's stringent emissions requirements.
"Canada has already permitted the sale of the Smart ForTwo CDI, which has been very successful" he said, referring to the model' diesel version that can drive 100 km on just three liters of fuel, or roughly 80 miles to the gallon.
When asked about the impact of the weaker dollar, Weber said he didn't believe there would be a short-term change in trend but added that the company was positioned better than German rivals due to its U.S. unit Chrysler, whose U.S. cost base provides a natural currency hedge.