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You make a good point about using this in conjunction with the occassional ZipCar-- given that, I think that there is a reasonably good sized demographic for which this makes sense-- it may still be a niche product, but I think its a niche that will respond favorably to the car.
Your end comment about child seats is important, and got me thinking about kids riding in these things. I've read elsewhere that the frames on SmartCars are pretty darn strong. Regardless, I think that I'll bust a blood vessel when I inevitably see someone driving a smartcar on the freeway with a child seat.