Mercedes-Benz may be looking to the Chinese market for its Smart car brand that has seen its sales dwindle in the U.S. High labor costs and low margins, have reportedly driven the Smart car’s profitability down coupled by consumer demand for SUVs and crossovers over the compact vehicle.

With only two seats and a tiny truck, the Smart car offered greater gas mileage than its gasoline counterparts, but it was not enough to sway buyers in the U.S.

Sales for the Smart car were just under 25,000 units in 2008 in the U.S., dropping to 1,276 in 2018, CNBC reported. Mercedes-Benz fared better in Europe, where sales reached around 97,000 units in 2018 but not enough for the automaker’s parent company Daimler (DAI.DE) to turn a profit, according to the news outlet.

Some analysts have said the Smart car brand is costing Daimler as much as $500 million a year. But this has not deterred the company as it has now partnered with Geely, a Chinese automaker, to produce the electric Smart car in China.

The move to China is anticipated to provide cheaper labor costs as well as open the Smart car up to the Chinese market, which is the largest car market in the world, CNBC reported. This coupled with Mercedes-Benz’s reported popularity in China, could be a win for the automaker that is looking to revive the brand in the region.

Mercedes-Benz co-founded the Smart car brand alongside watch company Swatch in the mid-1990s. It was introduced to the U.S. in 2008, offering fuel-efficient transportation in a compact footprint for urban dwellers at a time when fuel prices were on the rise.

Shares of Daimler stock were up 1.56 percent as of market close on Wednesday.

Smart Car
Daimler is only producing electric powered Smart Cars in 2018. Forbes
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