Mercedes USA to Acquire U.S. Distribution Rights for Smart Brand

Penske Automotive Group has agreed to surrender distribution of Daimler AG’s Smart car division in the U.S. Daimler’s Mercedes-Benz USA is now in negotiations to take over as the U.S. distributor of the ForTwo microcar. According to Mercedes-Benz USA CEO Ernst Lieb, the hand-over is expected to be finalized in July.

Penske has been the independent distributor for the Smart ForTwo in the U.S. since 2008. Although the French-built ForTwo sold well initially, sales have plummeted in recent years.

Following the take-over by Mercedes-Benz USA, the Smart brand will have 58 dealerships in the U.S.

Lieb said that Mercedes USA approached Penske about handing over distribution of the Smart brand at the Detroit auto show in early January.

In 2008, Penske sold 24,622 Smart ForTwos, in part due to concerns over record-high gas prices in the U.S. In the past two years, however, sales have fallen sharply. Last year, Penske sold a mere 5,927 units.

Both Mercedes-Benz USA and Penske have said that declining sales are not the reason for the pending hand-over.

According to Lieb, having the Smart brand in its stable will help Mercedes-Benz USA meet the tougher fleet-wide fuel economy standards that are scheduled to take effect in 2016. For that reason, Daimler integrated Smart brand into its Mercedes-Benz unit last September.  Mercedes-Benz USA hopes to boost sales volumes for the Smart brand and thereby increase its corporate CAFE ratings.

He said, “It has become clear over the last few months that Smart is an integral part of our achieving the fuel economy targets of 2016.”

Penske Automotive has agreed to handle the wind down of 17 non-Mercedes dealers in the U.S. CEO Roger Penske said the process will include buyback of Smart vehicles already in inventory as well as signage and other equipment as stipulated in the franchise agreement.

Lieb said, “In most cases a shop-in-shop (dealerships that sell both the Smart and Mercedes lines) has proven to be the most economical. If you are selling one or two cars, you need consistency in personnel and expenses. It will not work if you have a stand-alone facility.”

Roger Penske sees the handoff as a positive move for all parties. He said, “We have launched a brand we can hand off to MB-USA,” and conceded, “We couldn’t give it the muscle that it needed from a marketing standpoint based on the volume.”

Mercedes-Benz USA has also announced that it has canceled its “Project Quattro” development deal with Nissan Motor Company.

The deal would have added a four-door model, developed by Nissan, to Smart’s product lineup. Lieb explained the rationale behind canceling Project Quattro saying, “If Smart continued as a free-standing network, they would need a second model to make it viable. By integrating it into Mercedes-Benz, there is no need.”

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