A smart car on display at a shopping mall in Shanghai (Photo/Dfic)

Mar. 29 (NBD) -- China's Geely will play a part writing a new chapter in the history of German carmaker Daimler's smart brand. 

The two automakers announced Thursday they would set up a joint venture to operate the compact car brand worldwide as a premium all-electric car maker. This marks another important deal between the two companies since their partnership in the ride-hailing sector in October last year. 

Designed to facilitate urban mobility and ease traffic pressure, smart brought its first model to the market in 1998. Boasting cute look and agile maneuverability, the brand rose quickly to fame and has been well-received in congested cities like Beijing. 

But what comes along with the small size is limited cargo capacity. Plus the hefty price-tag, smart is destined to be a choice of a handful of consumers, for example, deep-pocketed people who have already had one or two cars and would like to buy a smart for daily commuting. 

As a result, the marque has been operating at a loss since its inception. 

Daimler has never disclosed the financial results of smart, but Frankfurt-based Bankhaus Metzler estimated the microcar brand has racked up about 4 billion euros (4.5 billion U.S. dollars) in losses, about 200 million euros (227.4 million U.S. dollars) each year. 

In 2017, smart sold 135,000 cars worldwide, down 6.5 percent from a prior year. The figure further dipped by 4.6 percent last year to 129,000 units. 

However, Daimler believes its smallest vehicle still has huge potential – in China and beyond, and Geely is the right partner to take advantage of these opportunities, Chief Executive Dr. Dieter Zetsche said.

This matches with Geely's Chairman Li Shufu's interest in small cars, according to a source with knowledge of the matter. 

The 50-50 joint venture between Daimler and Geely is expected to be finalized by the end of this year. The new entity will build a new generation of all-electric smart models in a new electric car factory in China. The new smart cars will be styled by the Mercedes-Benz design network and engineered by Geely's global R&D centers.  

The factory will likely be located in Wuhan, central China's Hubei province, a source with the German carmaker said when approached by Sohu Auto. 

In December last year, Geely gained the regulatory approval from Hubei province's development and reform commission for a passenger car project with an annual capacity of 150,000 cars, which is predicted to be the carrier of local production of smart models given the Daimler source's statement. 

Analysts held Daimler doesn't have any superiority in China's electric car market. Even the smart EQ fortwo, a chic urban runabout scheduled to hit the market in 2020, has received extensive criticism over cruising range lower than that of its rivals. 

The tie-up with Geely would probably turn the tables as the Chinese marker has decades of experience in the Chinese market and a large pool of talents proficient in intelligent vehicle. Geely has been expanding rapidly through mergers and acquisitions since 2010, when it acquired Swedish carmaker Volvo from Ford Motor Co.

As part of the development program, the smart product portfolio will be extended into the fast-growing B-segment, Daimler said. Global sales of Chinese-made all-electric smart cars are due to begin in 2022.

Email: lansuying@nbd.com.cn