Smart Automobile, a joint venture between Germany’s Mercedes-Benz and China’s biggest private carmaker Zhejiang Geely Holding Group, is considering raising funds as part of its plans to promote the minicar as an all-electric brand, according to people familiar with the matter.
Smart is talking to advisers and could seek about $500 million to $1 billion in fresh funds by selling a minority stake in the venture, the people said, asking not to be identified because the matter is private.
A private fundraising deal for Smart, which is currently valued at roughly $5 billion, could attract interest from other carmakers and strategic investment funds, the people said.
Considerations are preliminary and details such as the size of the round could change based on demand, the people said.
The joint venture will use the proceeds to boost its brand as an electric-vehicle maker, the people said. Smart’s global lineup will become all-electric, after the brand already made the switch in North America.
Representatives for Smart and Mercedes-Benz declined to comment.
Mercedes-Benz and Geely, owned by billionaire Li Shufu, formally announced the 5.4 billion-yuan ($849 million) Smart joint-venture, based in Hangzhou Bay, Ningbo, in early 2020.
As part of the agreement, Mercedes designers would style future Smart vehicles and Geely would engineer them. With production based in China, the venture would aim to extend its portfolio of pure premium electric and connected vehicles.
Smart signaled its upscale ambitions at the IAA in Munich in September by unveiling the Concept #1. The SUV's production version will be designed by Mercedes and built in China.
Mercedes first introduced Smart in Germany in 1998, and brought the quirky brand to the U.S. a decade later, with the initial two-seater model targeting urban buyers squeezed for parking spots. Sitting oddly next to the gleaming high-end S-Class, Smart never met its original global target of 200,000 annual deliveries.
Despite racking up losses, the tiny cars for some years helped Mercedes lower average fleet emissions in line with tightening regulations to even out burgeoning sales of heavy, gas-guzzling models like the GLE. That role has fast diminished since the German manufacturer started rolling out battery-powered models and CEO Officer Ola Kallenius shifted his focus to premium vehicles for better company valuation.
Mercedes-Benz’s parent Daimler, which counts Geely as one of its biggest shareholders, has lately been betting on China’s young, city-dwelling consumers to rejuvenate the brand in the world’s largest auto market. Still, the Smart joint venture will have to compete with a multitude of established and up-and-coming electric-vehicle makers in China.
Following the spinoff of Daimler’s truck unit in December, the automaker changed its name to Mercedes-Benz Group on Feb. 1, to signal its segue to a nimble standalone unit tackling the industry’s transformation.
Mercedes aims to have battery-powered models in all its segments this year to rival Tesla.