Prius has become the top-selling car brand. And now there may be a brand that’s smart enough to beat it.

It’s a brand called Smart or, officially, “Smart Fortwo.” Over 900,000 people in 36 countries have purchased this two-person “micro-car,” introduced ten years ago in Europe. In the United States, the only place you could see one before 2008 was on display at the Museum of Modern Art in New York City. But now Smart has entered the American market—and it appears to have hit the road at just the right time.

The Smart brand was created in the early 1990s in an unlikely collaboration between Mercedes-Benz and Swatch, the hip watchmakers. According to Smart USA, marketers of the Smart car in the United States, Swatch inventor Nicolas Hayek had an idea for an “ultra-urban” car and Mercedes-Benz engineered it. Smart Fortwo was introduced at the Frankfurt Motor Show in 1997 to rave reviews. Mercedes-Benz knew it had a winner and began full-fledged production in 1998.

Ten years later, Smart has been recognized as the ultimate urban car in the cities of Europe, Mexico, the Middle East, and Canada. Romans in particular are enamored with it. Toy-like in appearance, Smart seems as if it should have a wind-up key. But the latest tests by the Insurance Institute for Highway Safety belie Smart’s size—in May 2008, the American version of the car earned the highest rating in front-end and side-impact testing.

So how did Mercedes-Benz successfully introduce a new car brand into the most notoriously competitive brand category in the United States? Unconventionally, of course.

The company started by re-engineering the car for the American market. At less than 9 feet long, it’s larger than the European model, but still smaller than its already-small competitor, the Mini Cooper. The car was designed to exceed safety standards and to achieve about 33 miles to the gallon in city traffic, and 41 mpg on the highway.

Innovation is a hallmark of the Smart brand. Smart has removable, scratch-proof plastic panels that can be switched out fairly easily to change the color of the car. The car itself is a “safety cell”—a wraparound steel frame protects the driver and passenger in a crash. The interior feels surprisingly large because of such tricks as staggered seats, a slender dashboard, a large windshield, and a transparent roof.

The American model offers more choices. Consumers can choose the basic model, retailing for under US $12,000. They can also buy an upgraded Smart Fortwo “Passion Coupe,” which includes a panorama roof, air conditioning, leather steering wheel, and other features, or a “Passion Cabriolet,” the convertible version, which currently retails for $16,590.

Then there is the Smart promotional plan. Instead of investing in advertising, Smart USA used buzz to create awareness, interest, and demand. There was plenty of press coverage, accompanied by a road show. But perhaps the most unusual brand promotion is the manner in which the car is being sold—by reservation only. If a consumer wants to purchase a Smart Fortwo, he or she has to reserve one by making a deposit of US $99 via the Internet. Apparently, more than 30,000 Americans think this is a smart idea.

Also unconventional is the distribution strategy. Smart USA is actually part of a major automotive dealer, Penske Automotive Group, which is the exclusive distributor of the car. Smart USA will have a limited number of dealerships throughout the country, where consumers can look at the car and drive a test model, but not actually buy one off the floor. Only those with a reservation will be able to purchase the Smart, and it is taking six to nine months to keep up with demand. In fact, the car is reportedly sold out for 2008. Smart is so popular that it is showing up on eBay at prices 30 to 40 percent higher than retail.

At a time when gasoline prices are front page news, the Smart car is positioned to obtain plenty of media coverage. With its recent high crash test ratings, Smart is getting even more notice. And now that some 7,000 Smart cars are on the road in the United States, the brand will surely cause a stir. The Web is ablaze with Smart car news as well. An independent website, SmartCarofAmerica, has been created to channel information, and eBay sales continue to soar.

All of this buzz proves that the right kind of car brand can get people excited about cars again—especially if that car brand is smart.

Barry Silverstein is a 25-year advertising and marketing veteran and co-author of The Breakaway Brand (McGraw Hill, 2005).