For the better part of two decades, Mazda has timorously tried to reinvent itself as the Japanese BMW. Mazda’s caution has brought disappointing and even worrisome outcomes, though I admire the honesty of the effort.
Let’s be very clear. Mazda is a pipsqueak automaker with a lineup of quite affordable cars and SUVs (sport-utility vehicles) in a world of giants like the Volkswagen Group and Toyota Motor. VW earns billions selling Audis, Porsches and Bentleys; high-volume cars like the Golf and Polo are only marginally profitable. Toyota, for its part, is a model of lean efficiency earning rich returns from a strong truck lineup and a steadily evolving and very healthy Lexus luxury brand.
How can Mazda ever hope to compete against the likes of Toyota and VW, not to mention certain other emerging companies from, say, China?
Well, even the most casual observer long ago concluded that to survive, Mazda’s only option was to use BMW as a model for a thorough transformation. I’ve hoped this little Hiroshima-based car company would find the courage to risk everything, boldly throwing down a commitment to aim high — to reimagine itself as a true premium brand. I now fear this may never happen and time is running out.
The sad truth is, Mazda’s tip-toeing may prove to be the company’s eventual undoing. The numbers tell a very worrisome story. Still, I remain hopeful now that I have tested the very best, most refined compact car in the world – the all-new 2019 Mazda3.
The brilliance of the reinvented Mazda3 is being covered in an accompanying road test. Here, I want to comment on Mazda the car company and the Mazda brand.
Mazda, to be truthful, had a terrible 2018 fiscal year. Revenue increased three per cent to 3.56 trillion yen ($32.12 billion US), but worldwide retail sales declined four per cent to 1.56 million units. Most troubling, Mazda lost ground in North America and China, the world’s two largest new car markets.
Mazda’s operating profit margin slumped to 2.3 per cent from a very lousy 4.2 per cent the year before. Sales in Canada slipped a tiny bit to 73,869. For perspective, however, Nissan sold about twice the number of vehicles in Canada last year.
Not to be too cute, but the numbers show that Mazda is spinning its wheels. No growth or slow growth in the car business is the road to irrelevance and then oblivion. What baffles me is that Mazda’s leadership understands all the problems and the solutions are obvious and have been for decades.
I mean, those in charge today are quite familiar with Mazda’s come-to-Jesus moment in 2000, when, as a senior Mazda executive once told me, leadership “re-clarified our brand which had its roots in the roadster” – the MX-5 (Miata). Yes, that first Miata was more than a car; it was a metaphor, in both good and bad ways.
Indeed, while Mazda has a clear vision for its brand – make vehicles people want to drive – the company has been hampered by ambitions as small as its roadster, but not as nimble. Why? Fear.
Mazda’s think-small mentality is rooted in the near-ruinous rapid expansion of the late 1990s and 2000s. The company launched a slew of new models in a short time and prepared plans for an Amati luxury brand in North America to rival Toyota’s Lexus.
These aggressive and expensive initiatives nearly bankrupted the company. Ford Motor swept in to take a controlling share and rescue Mazda, though Ford has since divested itself of control, leaving Mazda largely independent.
Yes, Mazda continues to deepen its alliance with Toyota, but the bigger Japanese company does not appear interested in rescuing Mazda. For its part, Mazda seems utterly reluctant to become a Toyota brand.
So, no one should expect Toyota buy up Mazda. Toyota has no interest in becoming a multi-brand colossus like VW. Toyota appears content only to help Mazda with partnership and joint ventures that involve plants, financial services, and certain technologies.
Mazda, meanwhile, appears willing to muddle along with the long-term goal of offering something called “Mazda Premium.” Mazda Premium? Sounds like empty marketing-speak to me.
A reckoning is on the horizon, however. A small car company like Mazda, one earning thin margins on $30,000 vehicles, cannot hope to survive in an automotive universe in which the big players are investing billions and billions on electrification, autonomous drive and other expensive technologies
In addition, the state-supported car companies emerging out of China clearly threaten the likes of even VW and Toyota. Some, for instance, are suggesting that China’s Geely, already Volvo’s owner, is in the early stages of a slow-moving takeover of Germany’s Daimler.
Mazda’s current place in such a world is unsustainable. And now I wonder if Mazda has missed its chance to become the Japanese BMW?