The smart car (Swatch Mercedes Art) is the brainchild of Nicolas Hayek, better known as CEO of Swatch, the watch company. Hayek's dream was the Swatchmobile, which would do for the small car what he had done for the watch, producing a car that would be fun, cheap and simple yet environmentally sound, with electric or hybrid power.

Hayek initially teamed with Volkswagen in 1991, but the project was cancelled with adverse market research and a change of management at VW. Mercedes then stepped in as a partner and Micro Compact Car (MCC) was formed in 1994 as a joint venture between Mercedes-Benz and SMH (the maker of Swatch watches). In 1998, Swatch pulled out and MCC became a wholly owned subsidiary of Daimler-Benz, now DaimlerChrysler, the parent company of Mercedes-Benz.