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Tiny car, tiny price tag, tiny gasoline bill. The
Smart Car, made by Daimler’s Mercedes Car Group in Hambach, France, first
appeared on U.S. roads in 2008, just as prices at the gas pump were hitting
record highs week after week. The timing could not have been better. Tired of
emptying their wallets every time they filled their gas tanks, many U.S.
drivers were thinking about downsizing from a big sport utility vehicle or
pickup truck to a smaller vehicle. But were they ready for a 106-inch-long car
that seated only two people? Daimler was ready to find out.
The Smart Car had a good track record in other parts
of the world. From 1998 to 2008, Daimler sold more than 900,000 Smart Cars in
Europe, the Middle East, Asia, Australia, Mexico, and Canada. The car was cute,
nimble, and unconventional—a good size for getting through crowded, narrow city
streets and fitting into any tight parking spot. Not only was the purchase
price highly affordable, but the excellent fuel efficiency made the car especially
popular in countries where gas prices were generally high.
To bring the Smart Car to the United States, Daimler
redesigned the body and engineering to meet U.S. safety standards. It added six
inches to the car’s length and included four air bags, an antilock braking
system, a collapsing steering column, and other safety features. It also
installed a fuel saving 71 horsepower engine so that the Smart Car would go
about 40 highway miles on a gallon of gasoline.
Daimler set the list price of the Smart Fortwo Pure
model—the basic version of the two-seater—at $11,590. The list price of the
Smart Fortwo Passion Coupe, equipped with more features, was $13,590. The list
price of the Smart Fortwo Passion Cabriolet, a convertible with leather seats
and additional features, was $16,590. Buyers had the option of ordering extras,
like a metallic-paint finish or an alarm system, for an additional fee. Keeping
the list price as tiny as the car allowed Daimler to build market share
quickly.
Rather than selling Smart Cars through its regular
dealer network, Daimler contracted with the Penske Automotive Group to handle
distribution and sales. In another unusual move, Daimler set up a website to
let buyers reserve the model of their choice and choose from six interior colors
and six exterior colors on the car body’s removable panels. Three of the
exterior colors were offered as part of the purchase price, while the three
metallic exterior colors were offered at an extra cost. The $99 reservation fee
was applied to the buyer’s purchase price once the ordered model became
available. By the time Smart Cars arrived in U.S. showrooms, 30,000 people had
paid for reservations.
To build customer interest prior to the U.S. launch,
Daimler sent a number of Smart Cars on a 50-city U.S. tour. Nearly 50,000
members of the media and prospective car buyers took test drives. Although many
reporters couldn’t resist poking fun at the tiny car (USA Today called
it a “breadbox on wheels”), they all noted its high fuel efficiency and low
purchase price. Initial demand was so strong that even buyers who had reserved
their cars well in advance had to wait months for delivery. A few U.S.
customers who didn’t want to wait paid as much as $39,000 for European Smart
Cars adapted to meet U.S. safety and emissions standards.
Then gasoline prices fell from their record-high
levels and the global economy plunged into recession. By 2009, the downturn was
so severe that car sales plummeted across the board as U.S. consumers and
businesses clamped down on buying. The combination of significantly lower gas
prices and a sluggish economy put a serious dent into U.S. sales of the Smart
Car. To reignite customer interest, Daimler offered low-interest financing and,
for the first time, its U.S. dealers discounted the car’s retail price. In
2010, the company also introduced a limited edition electric Smart Car to
appeal to buyers interested in eco-friendly alternatives to traditional
gas-driven cars.
After reading this case, write a 1-2 pages paper
using the APA format discussing the following question. Today, Daimler
continues to face intense competition in the small-car segment
The
Smart Car
Student’s Name
Institutional Affiliation
Course
Professor’s Name
Date
Daimlers
Tiny Car Competition
The
introduction of Daimler’s smart car has been instrumental in the car industry
and especially for giving a choice for the low budget aspiring car owners. Also,
the car has served right in fuel consumption, and its size has been
instrumental in managing congestion in the big cities. However, the car has had
many challenges starting with its small size, which has made it limited to a
maximum of four passengers, unlike the big luxurious cars. The car also is
under criticism for lack of power and is only convenient for light duties. As a
result of its shortcoming, the car has received a lot of competition from other
bigger cars.
Smart
cars, because of their small size, are subject to safety concerns. According to
the laws of physics, later objects are less stable and thus risk a great impact
on accidents. When compared to the heavy, 6 feet tall, and 5000 pounds SUV,
smart cars are likely to face less preference. Heavy cars are stable, and the
people who care a lot about safety are considering having heavy cars like smart
cars. The growing preference for SUVs makes the demand for smaller cars
diminish and most profoundly in the united states. Unlike when the smart cars
were introduced and had a boom in the 2008 Global financial crisis and the
subsequent rise in prices of gasoline, they have since recovered from the
crisis attracted less demand.
Daimler is also facing stiff completion from other companies producing small cars. For example, a company like Elio Motors who are self-proclaimed “next big thing in the transport sector.” The Elo Motors have come up with “The Elio”, which is more cost effect than Daimlers’ Small cars. The Elio retails at around $6,800, but the Daimlers ForTwo is retailing at $11, 200 meaning that is Elio is cheaper and thus would be preferred by the low budget consumers (Zhongming et l., 2017). Additionally, the Elio is a fuel efficient car as it can cruise for approximately 84 miles with one gallon on a highway; this means that...
