Lower Gas Prices Deflate Sales for Smart, Other Smallest Cars

In only its second year, U.S. sales are down sharply for the Smart brand. Sales are also off for several other smallest-of-the-small cars that were all the rage a year ago, when gas prices spiked.

Sales are dismal for the Scion brand, the Toyota Yaris and the Chevrolet Aveo. Sales are also down, but not as much, for Mini and for the Honda Fit, according to AutoData Corp.

The exception to the rule is the Kia Forte, which is benefiting from the fact that it's an all-new model with a lot of features for the money, backed by Kia's most aggressive marketing ever. The Forte is handily outselling the car it replaced this year, the Kia Spectra, and everything else in the smallest-car segment.

"We're gonna have to have some incentives in the fourth quarter, to move the market going forward," said Roger Penske, CEO of Penske Automotive Group (PAG), which has the U.S. franchise for Smart. Mercedes-Benz parent Daimler (DAI) builds the Smart car in France.

Penske said late last month he now hopes to sell 15,000 to 16,000 Smart cars annually this year and also next year. A year ago, Penske was forecasting 2009 sales of 25,000 to 27,000 for Smart in the United States. U.S. sales for Smart began in February 2008. Sales last year were 24,622.

Penske said the next major new-product action expected from Smart is an electric vehicle, which doesn't go into production until 2012. Penske Automotive expects to get some battery powered demonstration models before then, he said.

In its third-quarter results, Penske Automotive said it set aside $3.1 million for discount finance programs and additional marketing for Smart, through the end of 2009.

Smart USA offered monthly payments of only $99 in August, assuming buyers could get the maximum $4,500 incentive from the Cash for Clunkers program. Even at that rate, Smart sales fell 33 percent from the year-ago month in August, to only 1,622, AutoData said.

The company's latest financing offer, according to smartusa.com, is $198 per month, plus 1.9-percent financing through the end of 2009.

In October, Smart's U.S. sales fell to only 661 units, down 70.4 percent. Year-to-date sales in 2009 were down 35.8 percent, to 13,082. Wholesale units were down 49 percent in the third quarter to 3,401. Year to date, wholesale volume was down 34 percent to 12,774, Penske Automotive said.

Photo: smartusa.com