Smart welcomes rivals, sees hybrid

By Kevin Krolicki

DETROIT (Reuters) - Smart USA, the distributor of Daimler AG's (DAIGn.DE: Quote, Profile, Research, Stock Buzz) Smart microcar in the United States, expects to have a hybrid variant available in two years with a rechargeable electric version to follow, a senior executive said on Tuesday.

"A micro-hybrid is a derivative that you could see here in the next two years," David Schembri, president of Smart USA said. He added that the introduction of an all-electric version of the upcoming vehicle was likely "a few years away."

Schembri also said Smart would welcome rivals in the still-untapped U.S. market for microcars since it would show the segment has the potential to grow.

"If there are no competitors, it's probably not a viable sector," Schembri told the Reuters Autos Summit. "We get excited when we hear other companies talking about developing products that will compete with us."

The Smart is expected to have combined highway and city mileage of 36 miles per gallon based on revised 2008 government standards, Schembri said. A micro-hybrid version would boost fuel efficiency by using battery power when the engine is idling.

Smart expects to ship its first vehicles to customers that have reserved its two-seat Smart ForTwo model in January, Schembri said. But it could take well into 2008 until it clears a backlog of "reservations" for the vehicle that it has taken in through the Internet, he said.

In a novel twist on marketing a new car, Smart has taken in over 30,000 Internet reservations for its Smart ForTwo at $99 per reservation in the United States this year.

More recently, the company has reconfirmed with over 8,000 of those potential customers, Schembri said. About 90 percent of those customers turned their initial reservation into firm vehicle orders with just 7 percent asking for refunds.

"We'll be well into 2008 to satisfy (the order backlog)," Schembri said. "Plus we're keeping the reservation system alive, and in the last three weeks we've had activity almost like the first three weeks."

Schembri said Smart would look to keep its Internet-based ordering system running even after it has more traditional dealerships open for walk-in traffic.

"It would be the ideal if there would be a 30-day or so order bank all the time," he said.

He said backlog of orders should help support resale values on the Smart cars -- a key measure of the cost of owning a new vehicle. "Residual values should be some of the highest in the industry," Schembri said.

Schembri said Smart, which is a unit of the Penske Automotive Group (PAG.N: Quote, Profile, Research, Stock Buzz), plans no traditional advertising for its brand, although the car has made appearances in movies such as "The DaVinci Code" and the upcoming "Pink Panther 2."

Schembri said Smart could maintain its low pricing despite the weaker U.S. dollar against the euro. Daimler makes the Smart vehicles in a factory in Hambach, France.

"The company's committed to providing great value and maintaining the basic principles of this car as an alternative to what's being offered today at a level that's affordable to a wide range of buyers," he said.  Continued...