Image: Smart car
smartusa.com
Fortwos come with luxury options like heated leather seats and power steering.
By Roland Jones Business news editor
msnbc.com
updated 11/21/2007 2:44:05 PM ET 2007-11-21T19:44:05

The 8-foot, 8-inch Smart Fortwo micro car comes to U.S. shores in January, and even with gasoline prices well above the $3-a-gallon mark it remains to be seen whether Americans will flock to buy the tiny, two-seater car.

Ranging in price from $11,590 for the base version to more than $17,000 for a fully loaded Fortwo Passion convertible, the 1,800-pound car boasts 40 miles per gallon — a big draw for drivers worried about high gas prices.

Smart has already sold more than 770,000 Fortwos in 36 countries, and Smart USA is banking on robust sales in the United States. The Smarts on sale here will be made in France and sold through 73 U.S. dealers, including Mercedes dealers and dealerships that are part of the Penske Automotive Group owned by racing icon Roger Penske. Penske is chairman of Smart USA, a division of Daimler AG’s Mercedes-Benz brand.

Smart says more than 30,000 consumers have put down a refundable $99 deposit to reserve a Smart car. Those deposits do not guarantee sales, but the company is hoping to move at least 30,000 units in the first year, said spokeswoman Jessica Gemmara.

“There will obviously be some fallout from the reservation program because of life changes, or because people move — things like that, but our goal is to fulfill all those orders,” she said at the Los Angeles auto show, where Smart has a large exhibit aimed at drumming up more business.

While small cars represent a tiny portion of the U.S. market, sales are growing, according to the Power Information Network, a division of market research firm J.D. Power and Associates.

Subcompact cars — defined as those cars smaller than compact cars, such as the Ford Focus and Honda Civic — made up 2.4 percent of the U.S. market in the first 10 months of this year, compared with 1.7 percent a year ago, according to J.D. Power data.

Other cars in the subcompact segment include the Chevrolet Aveo, Honda’s Fit and Toyota’s Yaris, the most popular subcompact on the market, which has managed sales of 73,874 units so far this year in hatchback and liftback versions.

Such strong sales are unlikely for the Fortwo, some analysts say. Even in Europe Smart has never been profitable. Daimler announced a restructuring of the division last year, when sales fell to 102,700 vehicles worldwide from 124,300 in 2005.

Not many U.S. subcompact cars sell in the 30,000-unit range. Close competitors like the Kia Rio and Scion xA sold 28,388 units and 32,603 units in 2006, respectively, while the significantly larger Scion xB sold 61,306 units and the popular Mini Cooper sold 39,171 units.

Another key issue is safety, particularly given the Smart Fortwo’s diminutive size. It is significantly smaller even than other subcompacts, so concerns about a collision with a large SUV or truck are likely to keep buyers away, analysts say. At 105.6 inches the Smart Fortwo is 45 inches shorter than a Yaris and 40 inches shorter than a Mini Cooper.

And at just 1,800 pounds, the Fortwo is 500 pounds lighter than any other subcompact,  putting its occupants at a potentially significant disadvantage in a collision.

The Fortwo has a steel safety cage and four air bags, including two in front and two on the sides to protect the head and abdomen. It also has standard electronic stability control, which is designed to stop vehicles from swerving off the road, and Smart USA President Dave Schembri says the Fortwo is designed to get four out of five stars on U.S. crash tests and recently got four stars on an equivalent European test. The U.S. government will test the Smart car after it arrives on the market.

Another possible indicator of low demand for the Fortwo is that many city dwellers, considered to be a prime target market for the Smart cars, use car sharing services like Zipcar or rent cars for shopping trips or weekends away. A Fortwo might be too small for such needs with only 8 cubic feet of storage room, compared with nearly 26 in the rival Yaris liftback (with rear seats folded forward).

But demand for the Fortwo could come from unlikely sources, according to Smart’s Jessica Gemmara.

“We’ve seen strong interest in places that surprised us, like Birmingham, Ala., or Tulsa, Okla.,” she said. “These are places in the heartland of America where people tend to own a truck and don’t want to drive a rinky-dink car, but we’ve seen some of the biggest turnouts in these places, and once these people get to touch and experience the car they’re just as interested as (big) city dwellers.”

The Associated Press contributed to this report.

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