Mercedes Benz & Geely Form a New Joint Venture for the Smart Brand in China

author: Eric Walz   

China is the world's biggest auto market and over the past two decades, global automakers have formed joint ventures with Chinese automakers to build cars locally and avoid steep import tariffs. The latest joint venture is between Mercedes Benz and Chinese automaker Geely Holding, which will revive the micro-car smart brand.

The German luxury automaker announced it is entering into a joint venture with Zhejiang Geely Holding Group (Geely Holding) named "smart Automobile Co., Ltd." which will formally establish smart brand as a global joint venture to develop premium electric vehicles for the China market.

The new joint venture will expand Mercedes Benz's reach into the Chinese auto market. The global headquarters of the new joint venture will be located in Hangzhou Bay, Ningbo with operational sales functions based in China and Germany.

Geely is the parent company of Swedish carmaker Volvo.

Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG, said: "The joint venture will bring the next generation of zero-emission smart electric cars to the Chinese and global markets. We look forward to continue our collaboration to bring desirable products and services to customers around the world."

Total registered capital of the joint venture is 5.4 billion RMB ($783.6 million) with both automakers equally contributing 2.7 billion RMB. However,  the share of Mercedes-Benz AG will be mainly covered by the contribution of the smart brand, which it owns.

Tong Xiangbei has been appointed CEO of the smart joint venture. He will oversee all operations relating to the brand including sales, marketing, R&D and production. Tong spent 17 years working at Ford's global facilities and oversaw the development of multiple new global assembly plants as well as the launch of multiple new models. He joined Geely in 2015.

In 2017, an electric version of the Smart Fortwo was available in the U.S.

Smart was owned by Mercedes parent Daimler for the past twenty years. The brand produced the Fortwo and Forfour two-passenger cars. The tiny micro-cars were once sold in 18 markets around the world including the U.S., where sales reached a peak in 2008 during the recession in the U.S. and gas prices spiked.

Smart produced an electric version of the Fortwo beginning in 2013 with batteries supplied by Tesla. Daimler invested $50 million in Tesla for the venture.

However, the sub-compact smart cars fell out of favor with U.S. buyers as consumers purchased larger SUVs and crossovers instead sedans and compact cars. As a result, the smart brand never really took off in the U.S. 

In March 2019, Geely bought a 50% stake in smart from Daimler. Daimler announced it was discontinuing the Smart Fortwo micro-car in the U.S. a month later due to poor sales. It had only offered the electric version of the Fortwo since 2017 in the U.S.

Mercedes Benz and Geely now plan to transform smart into a leading player in intelligent electrified vehicles in China.

The new smart vehicle product portfolio will be extended into the fast-growing B-segment, which is the European classification of passenger cars equivalent to the sub-compact category in the U.S. Although the vehicles will be small, future smart models from the joint venture will be built as premium electric and connected vehicles.

The new generation of smart vehicles will be designed by the worldwide Mercedes-Benz Design network and developed by Geely' global engineering network. Vehicle production will be located in China. 

The board of directors of the new smart joint venture will be made up of six executives with equal representation from both companies, including Geely Holding Chairman Li Shufu. Li is also Daimler's largest shareholder, with a 9.7% stake in the German automaker.

"The smart brand has a unique value and global influence, it has grown to be a leader in urban mobility." said Li. "We will work together with Mercedes-Benz to transform the smart brand into a leading player in urban premium, electric and connected vehicles to successfully develop the brand's global potential."

The first vehicle produced by the new company will be launched in early 2022. 

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.