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The slow-moving Japanese automaker has been revving up, but it has a long way to go.

By Alex Taylor III
July 30, 2014

Is this Mazda’s moment?

  • Its sales are up 8% this year, twice the industry average;
  • June 2014 represented Mazda’s best June in ten years and a 17% improvement over a year earlier;
  • The company’s Mazda6 flagship enjoyed its best June since 2006.

 

Along with higher sales, Mazda continues to win more awards in relation to its size than just about any other automaker. Last month, Mazda was named the most improved non-premium brand in the recent J.D. Power APEAL study for performance, execution, and layout , while the Mazda6 won highest honors in the hotly contested midsize car segment against such rivals as Toyota Camry and Ford Fusion. Mazda has been rated as the lowest cost to own brand two years running by Kelley Blue Book and it is the only manufacturer with two cars in Car & Driver‘s 10 Best list.

The buzz is growing. Tiny Mazda has a reputation among industry watchers, raters, and writers that is way out of proportion to its size. But all the awards and press clippings haven’t helped Mazda improve its longtime competitive position. Its market share has remained capped at two percent for more than a decade. Even with this year’s strong performance, it is running at a rate of 1.9%.

The pressure is on because Mazda’s Japanese parent wants it to boost sales by one-third over the next two years — the way to of 400,000 units in the fiscal year ending March 31, 2016, according to Automotive News. (Mazda sold 283,946 units in calendar 2013.) That’s going to strain the automaker’s under-performing dealer network as it undergoes a long-needed tuneup.

Some analysts say Mazda Japan may be asking too much. “Mazda has gotten the attention of the media and shoppers but hasn’t been able to translate that into sales even with highly lauded redesigns of core models,” says Edmunds.com’s Jeremy Acevedo. “Unfortunately, that doesn’t bode well for Mazda making that quantum leap to the next echelon in sales.” Awards and press clippings are nice, but they are only the icing, not the cake.

Back when I started covering the auto industry some 35 years ago, the Japanese manufacturers could be easily divided into three tiers, and the groupings haven’t changed much since then. Toyota, Nissan, and Honda – the Big Three in the 1980s –remain in the top tier today. The bottom tier– Isuzu, Suzuki, and Daihatsu – never improved their standing and have left the U.S. market.

No surprises there. Automotive market share is sticky and hard to win or lose. Especially among the Japanese, steady state is the most likely condition.

But the middle tier of the industry has produced big surprises from two of its members, Subaru and Mazda. (Mitsubishi, the third, has been struggling for more than a decade.)

Once Japan’s ugly duckling—anybody remember the Brat or the Baja?—Subaru has capitalized on the boom in compact crossover SUVs by combining its proficiency in all-wheel drive with smart marketing. As a result, Subaru has climbed into a solid fourth place among Japanese manufacturers, and now ranks 10th among all brands in U.S. sales.

In contrast, Mazda has, at best, been idling in neutral. Mazda has had its moments – the technology halo from the Wankel rotary engine, a financial lifeline from Ford Motor F , a long-lived and a well-liked signature model in the Miata roadster, which is celebrating its 25th anniversary. Even Ford CEO Mark Fields’ stint from 1999 to 2002 as CEO of Mazda Japan wasn’t enough to get Mazda moving. It currently ranks 16th in U.S. sales.

Mazda’s lack of momentum has stemmed from a variety of factors. It changed design strategies a bit too often to attract mainstream customers and didn’t change its advertising often enough. Its “zoom-zoom” tagline has been around since 2000.

Larger economic events didn’t help. A small car specialist, Mazda has been held back by moderate gasoline prices and, with most of its manufacturing Japan-based, by the pricing demanded by the over-valued yen.

Mazda’s best year in the U. S came back in 1986 when Ronald Reagan was president, when it sold 379,843 cars. The bottom came 2009 during the depths of the recent recession. While domestic manufacturers feasted on the Cash for Clunkers program, Mazda succeeded in selling just 207,767 cars.

Is Mazda now ready to break out and hit the ambitious sales targets that have been set for it? It has many positives in its favor:

  • Its lineup is well-balanced. In an overall U.S. market where sales of cars and trucks are nearly evenly split, Mazda sells neatly as many crossovers as cars.
  • It has two tent-pole models, one for each side of the sales lot: The compact Mazda3, a peppy compact that was all new a year ago, and the CX-5, a small crossover whose sales have climbed sharply in its second year on the market. “Mazda is punching well-above its weight class when it comes to product,” wrote Car and Driver. ”Its achievements are nothing short of shocking, like Buster Douglas knocking out Mike Tyson.”
  • After its ill-fated experiment with its Nagare (“inspired by wind and water”) design philosophy, it has adopted Kodo design (intended to embody the tension of power and speed in motion), which is proving more popular. The front ends of Mazda cars no longer resemble the mouths of fish.
  • And Mazda has successfully promoted a combination of engine, transmission and suspension technologies aimed at optimizing fuel economy by packaging them under the “Skyactiv” label.

Yet analysts remain skeptical. “The company’s focus on increased efficiency with ‘Skyactiv Technology’ has helped the brand in recent years, but it has merely allowed Mazda to stay competitive rather than propel forward,” says Edmunds.com analyst Jonathan Mandanici.

And that comment could apply as well to Mazda. As a small manufacturer, it has to be able to exploit niches. Subaru did that successfully with all-wheel drive and, among premium manufacturers, BMW has thrived as the makers of cars for well-heeled enthusiasts.

To date, Mazda has succeeded in becoming the car company for car lovers. But its pursuit of potential customers has been inconsistent and its ability to reach them has been hampered by its distribution network. To get up to full speed, it will take more than zoom-zoom.

An earlier version of this article said the Mazda5 was one of the company’s tent-pole models. The story has been updated.

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