Korean rivals no threat to Mazda

Three strong months of sales for Mazda Australia in 2010 have won the approval of the company's head office, but they haven't been enough to stave off Hyundai.

The Korean brand has outsold Mazda, according to last month's VFACTS sales figures; not only for March, but (narrowly) for the year to date. This result places Hyundai ahead of Mazda in the list of top-ten automotive distributors in this country -- fourth to Mazda's fifth.

Fourth place in the top ten is arguably an important position; the top three places all being occupied by local manufacturers (Toyota, Holden and Ford, in that order) and theoretically unattainable by an importer. That said, Hyundai's year-to-date figure of 21,213 sales is just 757 units behind Ford on 21,970.

Fourth spot allows Hyundai the opportunity to boast it's Australia's favourite full-line importer, something unprecedented for any Korean marque in this country -- but that's all contingent on Hyundai holding that position for the remainder of 2010.

For its part, Mazda may be loath to relinquish that spot, but MD Doug Dickson is not admitting as much. In fact, he doesn't see Hyundai as a direct threat to Mazda's profitability or prestige in Australia, even if the Korean company does retain fourth place. Furthermore, there's an outside chance Mazda may leapfrog Hyundai before the end of the year and retake fourth.

"If you look at the market at the moment, the first quarter is still quite distorted from the deliveries carried over -- orders taken last year," Dickson told journalists at a lunch last week.

"So it's anybody's guess where the market will end up this year, but what we do know is that private buyers are still a little bit out of the market...

"In the end of it, we have a plan, we have a production schedule and that's where we'll be going.

"We've asked them [Hyundai] to take good care of fourth position, because we want it back."

This remark was made in jest, but Dickson's follow-up suggests that Mazda doesn't concern itself unduly about Hyundai and sales bragging rights.

"We don't necessarily worry too much about what other people do."

Mazda's National Marketing Manager, Alastair Doak, went further and specifically discounted Hyundai as a direct competitor to Mazda in the two companies' most lucrative market segments, light and small cars.

"If you look at their line-up, their i30 basically starts and stops at $19,990. They have a very large gap in that line-up above that. We have a very successful product called Mazda3 that... covers the small-car market.

"Hyundai's got their own issues and they play on one thing, which is price."

In the light-car segment, Doak regards Toyota's Yaris as a more appropriate contender against the Mazda2 than Hyundai's Getz.

"We see ourselves as competitors to the other Japanese brands; Yaris is one of those and it's always been... so that doesn't change."

That's a view supported by Mazda's MD too.

"There are basically two areas of that light-car market; there's the cheap end of it..." says Dickson. "We don't necessarily play in that space -- and never will, because there are engineering standards that we have, which would never be priced down to where that end of it is, so we'll be happy to compete robustly with people we [perceive] to be our competitors -- mainly the other Japanese manufacturers."

However, Dickson is unable to say for certain whether Mazda has succeeded in snatching sales from Toyota in the aftermath of its recent bad press.

"We're not seeing an awful lot of reaction in the marketplace today," he said. "I'm not sure that it's actually affected our market as much as other markets. It's very hard for us to gauge.

But just on the off-chance that Mazda has snared some business that would have normally gone to Toyota, Dickson leaves no doubt: "We don't mind, we'll take [market share] from anyone."

The light-car segment is shaping up to be a real battleground for the Asian importers. Mazda has announced production for the Mazda2 has moved to Thailand and the updated model -- and a new sedan variant -- will arrive here from next month.

Mazda insists it won't compete directly with Hyundai, but would the new manufacturing base at least confer a lower landed cost that would help Mazda's profitability by ensuring fewer sales lost to the larger Hyundai i20 model built in India? Mazda has said in the past that the difference in exchange rates between the Aussie dollar and two principal Asian units of currency affecting the landed cost of cars here -- the Korean won and the Japanese yen -- has definitely favoured the Koreans. In this battle to reach the bottom, how has the Thai Baht fared, in comparison with the won or the yen?

"I don't think it suffered as much, but the difficulty with Thai production is that not all the parts are made in Thailand. Many are made in Japan," says Dickson.

"The Thailand factories weren't built potentially for exporting to South-East Asia, they were there to supply the Thai market. That market hasn't necessarily kept to its expectations, so everyone has looked around the area for export potential -- and Australia's been one of [the potential markets]. They were never set up just to supply us.

"It's not the low cost that you might expect."

The Thai currency has been volatile in the past. It was the currency that suffered worst during the Asian economic crisis of 1997 and current political turmoil in the country doesn't help the Baht's value any. If anything though, that does bolster profitability for Mazda.

"Thailand's not a silver bullet; there's a five per cent duty difference," says Doak, pouring water on Mazda bringing in the '2' for the price of a Proton S16 or a Suzuki Alto.

"The exchange rate can have a much larger influence than that five per cent. Just because you come from Thailand doesn't suddenly make your car a hell of a lot cheaper."

Dickson shares the view that Thailand won't protect Mazda from currency exchange rate fluctuations or companies sourcing cars in the same market segment from countries offering even lower labour costs -- India being one such, although the Mazda boss doesn't see Hyundai's i20 posing much of a threat. As far as he's concerned, Hyundai models appeal to different buyer types and buyers in different stages of life.

"Where [Hyundai] mainly pick up their business is from new-to-market buyers, so at the moment, I guess, there's still a group of people who pay a little bit more when they choose between the Japanese brands," he said.

"To the extent that anybody's in the marketplace, they're all competitors, but I guess you have to look at what people compare you to when they make a [purchase] decision. We basically look at that and see who should be comparing ourselves to.

"We do so much research it's not funny.

"The Mazda2 is very important to us, because it does give us the entry into the marketplace. The theory goes that if we can get somebody into the brand -- on a Mazda2 -- they'll be likely to move up to other products as they go through. We do pride ourselves on looking after our customers..."

Dickson, while committed to Mazda exceeding 80,000 sales this year, didn't care to speculate who would be 'fourth' by the end the year -- and probably with good reason. Irrespective of one's views concerning Hyundai's business strategy and sales tactics, the Korean company has been the strongest performer in the market, right through last year and the Global Financial Crisis. Stimulus or not, one shouldn't underestimate Hyundai in this market.

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