Larger, electrified Mazdas drive a multipart growth plan

MINE, Japan — Internally at Mazda, engineers and executives have a name for the small brand's traditional slow-and-steady upmarket move. They call it the "inchworm strategy."

With each model's redesign, they keep the base price planted in the range of the previous generation. But top-grade stickers reach higher, capturing the value of ever-better vehicles.

The tactic has not only lifted transaction prices in recent years, it has burnished Mazda's image as something approaching premium. Employees have their own name for that: Mazda Premium.

But now, Mazda the inchworm is coiling up for more than a caterpillarlike crawl.

This year, it will attempt a big leap forward in a bid to remake the lineup and its brand image for an industry under siege by change. The overhaul centers around a range of larger and electrified new vehicles that Mazda bets will boost U.S. sales 35 percent to a record 450,000 in just four years.

In a word, Mazda Motor Corp. is trying to find a new mojo.

CEO Akira Marumoto's ambitious growth gambit is not without its risks. Mazda has been reaching for — but failing to achieve — U.S. sales of at least 400,000 since 2013. And the new portfolio stretches Mazda's meager R&D budget precariously thin in an age when money matters more than ever.

Executives detailed the new push to Automotive News in a series of interviews and briefings, including a test drive of Mazda's newest crossover, the CX-60, at its proving ground here in western Japan.

The strategy has a lot of moving parts.

It hinges on new digital marketing techniques, overhauled retail networks, an expanded factory footprint and faster, more efficient product development techniques. And crucially, the drive relies on a big dose of electrification and help from Japanese partner Toyota.

But the wager bets particularly big on Mazda's biggest market — the U.S.

Mazda is doubling down on improving U.S. sales amid lackluster business nearly everywhere else in the world. U.S. customers are already responding. Mazda tied with luxury brand BMW for the No. 2 spot on Consumer Reports' 2022 brand report card. And Mazda topped the list the year before.

"We expect the U.S. to give us more constant, robust growth into the future," said Senior Managing Executive Officer Yasuhiro Aoyama, the global marketing and sales boss.

Anchoring the campaign is an assembly plant in Huntsville, Ala., Mazda's first new factory in nearly a decade. Huntsville should ramp up to full production by year's end, reaching a pace of 150,000 CX-50 crossovers a year. Mazda wants the new nameplate to drive its U.S. sales to 450,000 by March 31, 2026.

That target would smash Mazda's U.S. sales record of 379,843, set in 1986. It would vastly outstretch the 332,756 vehicles Mazda sold in 2021.

"We are putting emphasis on the U.S. market not only in terms of quantity but quality," says Masashi Aihara, president of the Huntsville factory, a 50-50 joint venture with Toyota Motor Corp. called Mazda Toyota Manufacturing U.S.A. "That is our mission."

Thanks to the old inchworm strategy, Mazda already has been gaining on the quantity and quality fronts. Last year, its U.S. sales soared 19 percent in an overall market up just 3.3 percent. Mazda's market share grew to 2.2 percent from 1.9 percent.

Transaction prices are on a similar trajectory, partly riding the industry tide higher. But Mazda's upswing in pricing power began before the wave of sticker shock was triggered by the global semiconductor shortage and supply chain crunch.

In 2015, Mazda commanded an average transaction price of $24,000 per vehicle. But by 2020, the brand's average transaction price had climbed to $31,000, by the company's reckoning, as Mazda tamped down incentives and beefed up its offerings, especially in crossovers.

Now, a wave of three new crossovers for the U.S. aims to build on that momentum.

First is the CX-50 midsize that arrives this spring from the Huntsville plant. That will be followed by two bigger crossovers — the two-row CX-70 and three-row CX-90. Those two entries, expected to be led off by the CX-90 in 2023, ride on a newly developed platform that accommodates a longitudinally arrayed rear-wheel-drive powertrain.

Mazda will launch that platform in the CX-60, a narrower, two-row crossover designed for Europe and Japan. A three-row CX-80 for those markets will soon follow.

Mazda wants the new vehicles to propel its global sales to 1.8 million vehicles in the fiscal year ending March 31, 2026, up from the 1.24 million that Mazda targeted in the just-ended fiscal year.

In the U.S., the CX-90 will replace the CX-9. The CX-50, by contrast, will be offered in parallel with the CX-5, at least for now.

The new large-product platform can accommodate a range of vehicle segments. But first, Mazda is focused on nailing the hot utility-vehicle market, said Takeji Kojima, managing executive officer in charge of product strategy and R&D administration.

The new crossovers will sport a variety of powertrains, including Mazda's first plug-in hybrid and a mild-hybrid diesel setup. But around 2025, Mazda will dive deeper into electrification with another new platform — a dedicated EV-only architecture that can scale to different sizes.

Industry watchers praise Mazda for polishing its brand image over the years. But Mazda's multipronged approach toward different drivetrains, and the company's shift to crossovers and away from its Zoom-Zoom roots in sporty cars, risks diluting the brand's public identity.

"Mazda has made some inroads to improve perception of brand position," said Stephanie Brinley, principal analyst at S&P Global Mobility. "The Mazda premium is less about a traditional luxury definition than it is about the attention to detail in design and development."

But Brinley also cautions: "Customers may not be sure what to turn to Mazda for. Mazda's global positioning is not as strong as some other brands, and offering regional utility vehicle solutions and regional powertrain solutions may not improve that scenario."

Such a burst of new product and drivetrains might also be a crippling burden for a small company such as Mazda. Toyota, for example, spends eight times as much as Mazda on R&D.

But Mazda prides itself on making the best use of its limited resources. By leveraging digital modeling and a software-first approach, Mazda can speed up and streamline engineering. All four of the new large crossovers were developed together in this new, efficient bundled process, which Mazda calls model-based development.

And the approach slashes overall R&D costs by 25 percent, the company said.

With the new product portfolio falling into place, Mazda wants to massage the sales and marketing equation toward higher profitability. Aoyama has a plan of attack that includes boosting average revenue per vehicle.

Mazda has an easy calculus for that: Bigger engines fetch higher prices. Thus, the company opted for a 3.3-liter inline six-cylinder turbocharged engine as the base powerplant for the CX-70 and CX-90. And for its foothold in the electrification game, it will mate a 2.5-liter four-banger to a robust plug-in hybrid system for added oomph.

"U.S. customer requirements are very simple. When they become more affluent, they require a more expensive vehicle with high output," Aoyama said. "So we would like to pay respect to this tendency to prepare higher-output vehicles and a higher-priced portfolio.

"It's a very simple correlation," he said.

Mazda is also working to reel in spiff spending, though that has been easier to do in a tight market where incentives are falling across the board. Mazda's U.S. outlays dropped 23 percent to $2,196 last year, below the industry average of $2,764, according to figures from Motor Intelligence.

But the industry average fell more steeply, retreating some 30 percent. And Mazda's average was still higher than such rivals as Toyota, Honda, Hyundai and Subaru. Mazda will have to maintain that discipline as industry supply rebounds and competition heats up again.

But Aoyama is betting Mazda's rush of new vehicles will help it hold the line.

Mazda also plans to drastically scale back traditional mass-market spending in the U.S. It will instead focus on tailored digital marketing for more "one-to-one communication" with customers, which Aoyama said is not only more effective, but cheaper.

The company's website will use more sophisticated software to customize landing pages to the profile and interests of individual customers, improving engagement and hopefully converting more clicks to buys.

The overhauled digital marketing campaign will begin with the launch of the large-product platform, Aoyama said.

"We lost a lot of money the old way," Aoyama said. "It can't be considered an investment."

Meanwhile, Mazda's U.S. dealership network is on track to renew facilities at some 330 outlets in key markets where growth is anticipated, including New York; Los Angeles; Chicago; Austin, Texas; Orlando; Miami; and Minneapolis. More than 200 facilities have already been refurbished, and about 100 more will be completed within the coming year, Aoyama said.

Those improvements helped Mazda climb to No. 3 among mass-market brands on J.D. Power's Customer Service Index Study this year. In 2019, it languished near the bottom, at No. 14.

Executives say Mazda is moving up exactly because of such incremental improvements.

"We don't say we want to become premium. We just say we want to strengthen our brand," said Hiroyuki Matsumoto, Mazda's vehicle development and product planning chief.

"We want to have a premium relationship with our customers," he said. "That's what we call Mazda Premium."