Smart eyes European production of electric cars

Smart could start building electric cars in Europe in a bid for increased efficiencies as it ramps up its global expansion plans and fleshes out its line-up. After production of the Fortwo ended earlier this year at Ineos’s factory in Hambach, France, Smart now builds all its cars in Xi’an, China. But with sales increasing in other markets and the increased costs of exporting worldwide, the brand is considering localised production in other territories to better cater to demand - with the added benefit of avoiding the EU’s new tariffs on Chinese EVs. Smart Europe CEO Dirk Adelmann told Autocar that the brand being co-owned by Mercedes-Benz and Geely gives it potential flexibility to globalise its operations: "We have a parent company based in Germany with production basically all over the world, but also Geely with other daughter companies has production in Europe and other places in the world.” He said building locally is “a good idea, if the cost structure is comparable to the cost structure you already have”, and that with Smart entering new international markets “comes the need to at least think about a diversified production footprint, but nothing is decided yet”. Aside from reducing export costs, building in Europe would also mean Smart could circumvent the punitive 19.9% import tariff that has been imposed upon its China-produced EVs by the EU – although Adelmann was adamant the decision to build in Europe would be a “strategic” one that is “independent of the EU Commission's decision". Adelmann noted that, in any case, the duties are provisional until the consultation period ends on 2 November 2024 and suggested that Smart wouldn't take any definitive action unless they were confirmed as permanent from that date. "There's a lot still to be discussed between the European Commission and China in that regard,” he said. “We currently – and I think it has been the stance of Smart over more than 25 years now – do not see protectionism as the answer to today's problems, and we also sincerely believe in and hope that the two continents will find a solution that does not end in a trade war. So we keep our fingers crossed.” Adelmann warned that the tariffs, if made permanent, could translate into higher prices in Europe: "You can imagine a 20% potential duty increase will lead to a roughly similar MSRP increase. At the moment, we do not plan to pass this on to our customers, but obviously, if those duties get confirmed as permanent duties, then we have to react." Asked if Smart would still consider its European business case viable in light of a 20% pricing uptick, he replied: "That is the big question. It depends on what the competition is doing and if people in Europe go towards the direction of ICE [cars] again. "If the entire industry is passing on the duties, then either the customers swallow the price increase or the customers move away from BEVs, which would be a disaster for Europe." Adelmann said Smart had grown quickly in Europe since its all-electric relaunch with the #1 and #3 SUVs, posting a year-on-year sales uptick in May – “which is in the current environment, unique” – and the #1 becoming one of the market’s top 10 EVs. He noted that car buyers are still “reluctant” about EVs, “because the government is sending mixed signals – to phrase it politely – towards the end user”, citing Germany’s recent removal of EV purchase incentives as an example. However, he was optimistic that Smart remains on an upward trajectory, with two models now on sale and a third – the #5 large SUV – due in the middle of next year. Smart has particularly high hopes for the UK, which it says will be its second biggest European market behind Germany. “We do see in the UK signals of performance going in a direction where we have expected it to be,” Adelmann said, now that the brand is “tapping into channels we didn't touch [salary sacrifice and Motability] due to the ramp-up phase when we had to focus elsewhere".