It is marketed as the “smart” in all lower-case, with the current Smart brand logo denoting a letter “c” for “compact” and an arrow for “forward thinking”.

The idea behind the car was to create a vehicle easy to park and short enough to allow “nose-in” parking. Its length of 250 centimeters would equal the width of a regular parking slot, allowing two or three Smarts to park in the same space as one normal car.

The project, started by Swiss watch manufacturer Swatch, was nicknamed the “Swatchmobile”. The name Smart is an acronym for Swatch Mercedes ART. Intended to use innovative features (such as a hybrid engine) and be affordable for young people, the Smart had similar design objective to the Citroën 2CV of the 1940s.

Swatch CEO Nicolas Hayek sought an established car maker to produce his Swatch car. After General Motors reviewed and rejected the project as potentially unprofitable, Hayek found a partner in Volkswagen. Due to VW’s own financial weakness at the time, plans never reached a final stage so Swatch teamed up with Daimler-Benz. The purpose-built factory complex Smartville in Hambach, France, was established in 1994 as a joint-venture of Daimler-Benz and Swatch.

An Australian dealer web site provides the following summary of the beginnings of the product:

“How everything began: In 1993 Mercedes-Benz started a feasibility study on a subcompact car. Together with the Swatch Group Ltd. they founded the Micro Compact Car AG in 1994. The Smart city-coupé celebrates its world première at the IAA in Frankfurt (Germany) in 1997 and is one year successfully launched in nine European countries. By now, the Smart is available in 37 countries all over the world and was sold over 750,000 times.”

The final car design proved to be far from Hayek’s expectations: its engine eco-technology was outside of Mercedes’ goal. The joint venture experienced heavy losses and dispute when Swatch pulled out.

In 2005, DaimlerChrysler decided against purchasing a 50% share in the Dutch NedCar plant used to manufacture the Forfour supermini. DaimlerChrysler also halted development on the Formore and decided to discontinue production of the Roadster.

In 2006, after dwindling sales, Smart GmbH was liquidated and its operations were absorbed within the Mercedes-Benz automobile group. Smart GmbH lost nearly 4 billion euros from 2003 to 2006.

The Smart ForTwo Electric Drive – first shown as a technology demonstrator at the 2008 Paris motor show – will be offered to U.S. consumers in the second half of 2010. We’ve yet to hear firm specifications of the production vehicle, but it will use lithium-ion batteries, likely produced by a new joint-venture between Daimler AG and Evonik Industries.

Initial volume of the ForTwo ED will be limited, but Schembri revealed to us that volume production of the electric microcar will begin in 2012. It’s still unknown if the cars will be sold outright to consumers, or leased to customers on a short-term basis (as with the Mini E).

Apart from this year’s U.S. introduction of the ForTwo Brabus, the ForTwo ED will likely be the biggest change to Smart’s lineup in the next few years. Though Schembri says owners of the 24,622 Smarts in the U.S. don’t hesitate to suggest improvements, they’re mostly related to minor accessories – cruise control, for instance, is in the works for the first time, as are aftermarket accessories including an armrest and cargo cover. Another suggestion was the new Smart Express program, where customers on a waiting list are notified if a previously-reserved Smart matching their specifications becomes available.

Schembri hopes these minor refinements, along with the ForTwo’s relative low-cost of ownership and fuel efficicency, propel 2009 sales to levels seen in 2008.