MUNICH -- The troubled Smart brand may shift toward cheaper pricing in its quest for profitability.
A source at Smart parent company Mercedes-Benz said making the premium-price small-car company more value-oriented to boost sales is one option being considered.
"We have to acknowledge that we are competing with cars like the Opel Corsa and the Ford Fiesta," the source said.
Currently Smart models carry premium prices because of the brand's "cult" image aimed at young, affluent consumers. In the future, Smart could offer option packages and prices could fall.
Smart has already offered better-value models. When the ForFour was introduced in April, a "Blackbasic" limited edition was offered for E11,700, E1,200 less than the base model.
To help sales, DaimlerChrysler is lowering standards for Mercedes dealers to add a Smart franchise. Future Mercedes dealers will not have to re-tile in white the entire showroom area where Smarts are sold. A white podium will be enough.
Smart hopes to significantly expand beyond its 840 sales outlets worldwide. In Germany, Smart has 118 dealers, including 63 Mercedes duals.
D/C CFO Manfred Gentz put the Smart brand's weak performance in the spotlight during an October 28 conference call with reporters and analysts. He said all options for its future are open.
Smart has lost money since its launch in 1999. Some forecasters say its 2004 losses could be E400 million to E500 million.
Sales are well below expectations. The new ForFour is 25 percent below projections, the ForTwo's sales continue to decline, and executives say Roadster sales are disappointing too.
"Lowering the brand is dangerous not only to Smart but also to the Mercedes image," said Jochen Siebert, vice president Europe for researchers CSM Worldwide in Frankfurt.
Smart needs new strategies in the future, said HypoVereinsbank analyst Rolf Woller. He said: "Going on as before is the worst of all options."
At the Paris auto show in September then-Smart head Andreas Renschler revised sales targets for 2004 down to 160,000 units from 180,000.
In April, Renschler said Smart would not make a profit until 2006. Earlier he had said the brand would be profitable by this year.
Smart sales rose in western Europe in the first 10 months to 111,020 from with 94,683 in the same period last year. The rise was due to the launch of the ForFour in April.