Mercedes thinks time is right for Swatch car

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GERMANY'S luxury car manufacturer, Mercedes-Benz, is teaming up with the Swiss maker of Swatch watches to produce a revolutionary mini-car.

'Swatchmobile' is the brain- child of Nicolas Hayek, chief executive of Switzerland's SMH, who is credited with reviving the Swiss watch industry with Swatch in the early Eighties. He wants to apply the same mix of low cost, high quality and unconventionality to solving urban transport problems.

Mr Hayek sees the new car, which he said will not cost more than 15,000 Swiss francs ( pounds 7,000), as a revolutionary two-seater, which will be powered either by electricity or some hybrid engine mixing electricity and petrol. SMH wants to launch the car at the Olympic games in Atlanta in 1996. The firms expect to set up a joint company to carry out the project.

The decision, taken at a board meeting yesterday, reinforces Mercedes' new strategy of broadening its appeal beyond the luxury market. Mercedes announced recently that it will build a small city car, the A class, scheduled to begin production in 1997. The proposed venture with SMH will produce a smaller and cheaper vehicle in the underexploited market of lower- pollutant city run-abouts.

Volkswagen, had been involved in the 'Swatchmobile' project, but pulled out in January 1993 as part of its strategy to save costs. The discussions with Mercedes have been going on for more than a year, suggesting that the luxury manufacturer was interested before VW departed.

Mercedes said that even though a clear industrial concept exists, with a well-advanced prototype, a number of important questions are still open: where the car will be produced; whether it will carry a Mercedes star; who will market it. The company said it was too early to talk about investment figures.