Daimler has struck a deal with Geely for a 50:50 joint venture based in China to develop and operate the Smart brand globally as an all-electric carmaker.

From 2022 onwards all Smart models for global markets will be produced in China. Until then, the Smart Hambach plant in France will continue to make Smart cars; after that date it is repurposed to make a compact electric car for the Mercedes EQ brand.

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The joint venture partners have agreed that the new generation of Smart vehicles will be styled by the worldwide Mercedes-Benz Design network with engineering from Geely global engineering centres.

As part of the vehicle-development program, the Smart product portfolio is also planned to be extended into the fast-growing B-segment.

In parallel, the Smart Hambach plant in France will assume an additional new role in the Mercedes-Benz Cars production network and will produce a compact electric vehicle by Mercedes-Benz under the new product and technology brand EQ in the future. Mercedes-Benz is investing EUR500m at the Hambach plant, with the current workforce retained.

This deal makes a lot of sense for both carmakers, yielding benefits to both as electrification gathers pace in the global auto industry. China’s circa 30m unit annual market is shaping up to be at the epi-centre of this transformation over the next decade.

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For Daimler, it reinvents the Smart brand – a brand that has had limited success as an urban small car niche player – as an all-electric specialist. Moreover, it shifts the manufacturing base for the brand to China from 2022. That in itself would be a good move given the importance of the Chinese market for future sales of EVs, but it has also selected a well-established local partner for the venture, something that will be essential in securing a good manufacturing base and supply chain.

“China has more electric vehicles than all the other countries in the world combined. Geely strongly contributes to this, because this company is driving the electrification of its international model range with the same determination.”

In his blog, Dieter Zetsche neatly summed up the attraction of Geely for Daimler: “Now it is only logical that the electric future of smart is also emerging in China. After all, China has more electric vehicles than all the other countries in the world combined. Geely strongly contributes to this, because this company is driving the electrification of its international model range with the same determination.”

And he also noted the potentially huge future connected services revenue streams facilitated by 5G cell networks: “Today, connectivity at 5G speed opens up a whole universe of opportunities. Together with Geely, we are therefore investing not only money but also talent and experience of both of our companies to use all this potential for our Smart customers around the world.”  

Back in Europe, Mercedes also has the opportunity to repurpose the current Smart Hambach plant and dedicate it to the emerging Mercedes EQ electric sub-brand – which is about larger and more premium electrified vehicles than Smart.

Geely gets the benefits of working closely with a German premium maker in the venture – both in joint design and development of future electric Smart models themselves and in the delivery of new mobility services to future customers via the Smart brand. This latest venture deepens the cooperation between the two – there is also a JV agreement to provide ride-hail mobility services in Chinese cities.

One thing though. The deepening relationship between Daimler and Geely will likely attract some interest from BMW. Daimler and BMW have already created a JV for future mobility services. They are also combining on autonomous tech research. There has even been talk of the two rivals sharing a future car platform. Lines could increasingly get blurred in the converging Connectivity Autonomous Shared Electric (CASE) megatrends space for future urban mobility. It’s a very dynamic business space, as growing numbers of collaborations between companies indicate. FOMO maybe. But don’t rule out quarrels down the road over who is working with who and sharing what, exactly. 

See also: BMW and Daimler outline mobility services JV plan

BMW and Daimler to work together on next-gen AD tech

BMW and Mercedes talks prove auto is very CASE sensitive