Mercedes has sold half of its share of Smart to Geely. It’s a headline that was both shocking and not entirely surprising. While this news isn’t surprising (Mercedes has been losing an estimated 700 million annually on Smart in recent years), this does signal a sea-change for Smart and may elude to what’s next for MINI.
For those who aren’t keeping track, China based Geely now owns Volvo and Lotus and is busy building very competent cars with a combination of Chinese production and European design and engineering. By off-loading much of the cost of Smart to Geely, Mercedes is now free to focus on it’s electric sub-brand. There’s a lot to dig into here that could have hints of MINI’s future. Some were surprised that Mercedes didn’t sell the entire brand. Given increasingly stringent C02 standards it’s clear that Mercedes isn’t entirely giving up on Smart – especially as the brand transitions to all-electric. An all electric city car is something that clearly has a future globally and especially in Europe. However that’s a big leap for an automaker that sees most of its current profit in mid-sized and large SUVs.
Thinking beyond the immediate and into the near future, what makes sense is mid-sized electric vehicles. This is exactly what Mercedes want to focus – far more than Smart. The obvious question we have is, will BMW follow suit? In some ways they’ve beat Mercedes to the punch. BMW has already announced that they’re going to partner with Great Wall on the development of the next generation small MINIs. But the crucial difference there is that BMW is both retaining the brand control and leading the development of the Countryman and all larger MINIs.
For BMW this allows them to off-load some of the enormous investment that will be required to develop a small electric platform – essential for a small automotive company that is already spending billions on their own next generation platforms and technologies. Of course things get tricky if BMW needs to free up even more capital. In that scenario the next move could very well be to sell a portion of the brand similar to what Mercedes has done. There are plenty out there that are predicting this and even more – selling the entire brand. But Smart and MINI aren’t an apples to apples comparison. BMW has made MINI profitable globally through BMW’s platform sharing strategies and the brand (despite being slightly down last year globally) looks rather strong. That’s something Mercedes never got close to with Smart – even with it’s recent platform sharing agreement with Renault.