Smart's Electric Minicar Is Priced Not to Move -- and That's the Point

Why would anyone lease the Smart Electric Drive, a modest two-seat electric car? Compared to the Chevy Volt and Nissan Leaf, the Smart offers, to quote the Los Angeles Times, half the car for nearly twice the price.

The Smart's sky-high four-year lease price is $599 a month -- $649 if you want the convertible. And there's a $2,500 signing charge, too, not to mention add-ons as tax, dealer fees, title, license and security deposit. The Chevy Volt, with room for four passengers, 300 miles of gas-fed range and far more electronic sophistication, leases for $350 a month. The Nissan Leaf, equally formidable and just as accommodating, can be had for $349.

A crazy kind of sense
But the Smart approach, like that of fellow German EV vendor BMW, makes a crazy kind of sense: Offer just a tiny number of lease-only cars in a pilot program, and unmet EV demand (especially in the Northeastern states) will be enough to get most of them leased, even if people squawk about the price. The Smart is distributed in the U.S. by Roger Penske, but pricing is heavily influenced by Daimler in Germany.

There will be only 250 Smart EVs for the U.S. in what is the second part of a three-phase program ending with phase three: the wide rollout in early 2012.

Lucky breaks?
The plan seems to be working for now, because Smart has successfully leased more than half of its allotment for the U.S. Smart seems to have gotten lucky, because Nissan and Chevy are moving slowly to get cars into the pipeline. You can get a Smart right now, compared to what could be a year wait in some states for the Leaf.
Wheego, another electric-car outfit, explictly touts the availability of its cars to move its LiFe two-seat EVs, which cost as much as the Leaf. But Smart's strategy is unlikely to work for the mass-market rollout next year, especially because there will be much wider availability of the other, cheaper cars.

Smart will also have to start selling the cars at that point, and right now they carry a ridiculous MSRP of $44,387. Yikes! That's more than the Volt. Sure, it's eligible for the $7,500 federal income tax credit, but all the battery cars get that. All of its prices will be revised downward when the car goes wide, Smart says.

Put it in perspective, they say
Rick Bourgoise, Smart's chief spokesman, said the lease price "needs to be put in perspective -- it's a low-volume niche vehicle, and the $599 reflects that. Once we get into series production, there will be economies of scale." Leasing started in January, and according to Bourgoise, "more than 150" have been taken nationally. He declined to offer an exact number.

Actually, what's happening with the Smart electrics mirrors what happened with the company's gasoline cars on a larger scale: Initial enthusiasm that then slows to a crawl. As a brand, Smart is really hurting. For its first 18 months here it sold really well, more than 1,900 a month on average from March of 2008 through August of 2009.

But it's been downhill since. Just 6,000 of the gas versions moved last year in the U.S., and that's with a very affordable introductory price ($12,490 MSRP). The electric version benefited from the initial publicity (the ads read, "You'll get a real charge out of it") but moving the last 100 two months into the leasing program may take a while.

What the customers say
At the Fairfield, Connecticut dealership, a lone Smart Electric drive sits out on the tarmac. One car has been leased, and they're looking for that next customer. Salesman Rick Baker told me. "The price is high for me, but there's a low operating cost so that's an offset. At today's gas prices, it gets something like 160 miles a gallon." Manager Eric Mitchell admits, "Obviously, it's more than the Leaf and Volt."

The one Fairfield customer is publisher Bill Harris, and he agrees the lease price is high. He said in an email:

I'm leasing it through my publishing company as a business expense. It probably is too high to be widely attractive to the mass market, but I believe that is a function of [the high cost of] any ALL-electric car's battery pack.

Smart has a further defense. In an email from Germany, Daimler spokesman Matthias Brock describes the deal as an "equitable offer" because it includes a full service package (electricity not included, unfortunately). But EVs don't need a whole lot of servicing.

The Smart EV is a decent car -- and in my short test drive actually accelerated and performed better than the gas version. With Tesla's help, it's well engineered. But it has very limited utility compared to those other cars, without what you might expect to be a compensating gain in range (it's just 83 miles). It's a city runabout or a second car, and $600 a month is a lot to pay for a second car.

Bourgoise points out that both the lease and list prices are likely to drop when the electric Smart actually goes on sale, and they better. Smart should make the smart move here and bring prices into line for the big rollout next year. Here's a closer look at the car on video:

Related:

• Smart Car is Smarter Than it Looks, at Least for Distributor Roger Penske
• Wheego Aims to be the Little EV Company that Could