One of the newest cars to drop into the US market is the Smart ForTwo. A decade after its European debut, the two-seat city car finally arrived stateside after several abortive attempts by both its parent company Daimler and independent distributors. This time around Daimler worked with a US distributor set up by serial entrepreneur and race team owner Roger Penske to create SmartUSA. At the LA Auto Show last week we sat down with SmartUSA president David Schembri to discuss the company's first year in the American market and where they are going.

When it launched, SmartUSA set a target of 20,000 annual sales in this country. Given that this car is definitely a niche product, that relatively modest goal was probably wise. As it turned out, it was actually fairly conservative. Smart delivered the first US-spec ForTwo to a customer in Manhattan on January 16 of this year and the 20,000th example earlier in November "to a couple in their mid-fifties, empty-nesters," as Schembri described them, in Dallas TX. Not bad for a car that has received decidedly mixed reviews from both media and prospective buyers in this country. Read on past the jump for more of what Schembri talked about.

Before Smart officially went on sale, the company launched a promotional campaign in mid-2007 that included a road show to introduce the car to America and a web-site where people could make a reservation for a fully refundable $99 deposit. The reservation program helped SmartUSA judge interest in the car and decide where to open stores. Since most of the people who signed up had never driven the controversial little car, it was a good move to allow people to back out and get their money back if they decided the car wasn't for them. More on that in a bit.

It's turned out that the Smart is casting a pretty wide demographic net. Both young and old seem to be attracted to the ForTwo. As Schembri explains it, "we couldn't identify the target customer. Every time we would send out consumer polls or questionnaires, we quickly found out this wouldn't be a target demographic defined by age or income, but rather by attitude or lifestyle. The people were more defined by being thought leaders in their peer groups. The car had a chance to transcend not only generations but traditional buying segments."

"First time buyers would love the car because of the value of the vehicle, urban dwellers because of its obvious urban applicability, empty nesters because they don't need a car for four, five or six people anymore." Based on the sales so far all of this has turned out to be true. According to Schembri, "it's somewhat consistent" when compared to the European demographic. The US is now the third largest market for the ForTwo, with Italy and Germany leading the way.

On the question of growth, Schembri explained that SmartUSA's goal isn't a "volume goal, but a goal to sustain a business model that makes sense for the customer, for Daimler, for SmartUSA and for our dealer organization." Smart intends to try to supply cars for however many people express an interest while not overdoing it. When the car went on sale in January, the company had over 30,000 reservations and now, 21,000 sales later, it still has about that many. As customers have taken delivery, more people are signing up. As expected, some people who reserve a car end up canceling for a variety of reasons. Schembri tells us the cancellation rate is about 30 percent. The upside of this is that customers who want a car right away are offered the opportunity to buy from the canceled orders.

That backlog is apparently part of the reason for the cancellations. Schembri said, "the main reason they cancel is that their life situation changes. We question the customers when they do cancel, it's either the wait was too long I needed another car right away," but the number one reason is "these days, the way Wall Street is, things change quickly."

On expanding the lineup, Schembri said, "I think what we see in the near future is fuel derivatives, mainly in plug-in technology." As for the 72 mpg diesel Smart available in Europe coming to America, "Right now the plan is to continue with the current engine," Schembri said. "Customers feel it's a good balance between performance and value and the development along the lines of future technology will be in terms of plug-in." Smart also offers the so-called micro-hybrid automatic start-stop system. "We looked at that. It's an interesting product, it could be available now. But what we found was because of the different roads in the US, the savings really can't justify the premium. Because most people drive a 50/50 combination of highway and city, it doesn't give enough fuel savings advantage to justify the premium for the technology."

Back on the subject of plug-in Smarts, we asked Schembri about the rumors of some of the new lithium ion powered Smart EDs being offered for testing in the US market. "There hasn't been any announcement yet for the US market, but that's being looked at. The determination on the specific markets will be made after the results from the pilots come in. We look forward to that development in the US, looks like that's where the technology is really headed."

We also raised the question of who is supplying the electric propulsion system even though we expected a "no comment." Schembri replied "As the independent distributor, we distribute and sell and market the car and aren't that involved in the technical development." So Tesla may or may not be the provider. For that answer we will have wait a little longer.

To sum it all up: So gas and electric yes, diesel and micro-hybrid no, hold the course on volumes.

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