The deal, completed in January, includes production of Smart vehicles in China. The brand will remain focused on electric, urban-centric cars.
Schäfer said that while Smart had been successful in terms of how it was received by consumers, it had failed to be commercially viable.
He said: “It was a successful product in terms of customers liking it and moving to an EV-only brand was a courageous step but ultimately we missed the opportunity to make it commercially successful.
“We need to increase volume. With current volumes, we don’t have scale and we need to be competitive in a world where larger volume – especially in this segment – is extremely important.
He said the combined forces are now geared towards product design, which is based mainly at Daimler HQ, and working side by side in engineering. “This is a good basis for us to create a scalable platform and enough volume to be successful,” Schäfer said.
Smart is due to introduce new electric Fortwo and Forfour models by the middle of the year. By 2022, a compact electric SUV is expected.
Schäfer said: “We have the genes of the brand – and, with engineering and design power, we are off to a good start. In terms of product, I would say ‘stay tuned’.”