Mazda gambles on rising consumer confidence

Small-car buyers are about to get more than they bargained for from Mazda dealers -- in a good way.

At a time when the importer's archrival Honda is raising prices (more here), Mazda is holding the line and anticipates that pricing for the new Mazda3 will remain fixed for the foreseeable future. Even if the Australian dollar doesn't improve in the short term, Mazda MD Doug Dickson reckons that pricing of the new '3' won't have to rise before about July this year.

"We expect to hold prices for at least three months," Dickson told journalists at the local launch of the new car.

Dickson, who describes himself as "not a betting man", nonetheless remains confident that the Aussie dollar will bounce back in the meantime.

Not only is Mazda's pricing strategy for the new car (more here) contrary to Honda's view of the economy and currency exchange rates, it applies pressure to Toyota's Corolla and Volkswagen's new Golf. A straw poll of journalists conducted unscientifically by the Carsales Network at the Mazda launch suggests that Volkswagen could have a real battle on its hands.

The least expensive Golf (more here) is $1000 more than the mid-range Mazda3 Maxx and, while the Golf offers slightly more technology (fuel-efficient turbocharged engines and optional DSG transmissions), the Mazda's pricing and its fairly immediate 'test-drive' appeal will make it a tough opponent for the VW.

As for Corolla, it's $500 less expensive in its entry-level version than the base-grade Mazda3, but we can already tell you that the Mazda has at least $500 worth of additional driving enjoyment that the Corolla lacks. Mazda has upped specification of the new model (adding electric windows to the standard entry-level model, the Mazda3 Neo, for example) to bring it a little closer to, or even surpass the Corolla for value. The new Mazda3 range is structured in a three-tier hierarchy of 2.0-litre variants, capped by the 2.5-litre Mazda3 SP25, so it's brazenly taking on small-car competitors across the prestige spectrum; the Corolla and Golf being just the two highest-profile models. Honda's Civic, the Mitsubishi Lancer, Peugeot 308 and the Subaru Impreza are all potentially in the Mazda's cross-hairs.

If the Mazda3 looks like a sure-fire thing for Mazda, the company's plans for stock ordering for the remainder of 2009 is less certain. One of the hallmarks of the market in Australia over the past six months or so has been the relatively gentle decline in sales -- at least compared with markets like the US -- combined with the local car companies' rapid response to the changing situation (click here for Toyota's view on the market ). According to Mazda though, most car companies have stopped all forward ordering dead in its tracks. When the car companies aren't ordering enough stock to meet a possible upturn in demand within coming months, the car industry's forecast of 'just' 850,000 units sold for the year becomes a self-fulfilling prophecy.

All the portents suggest that consumer confidence is already on the rise, despite daily news of more people made redundant. As Mazda's National Vehicle Sales Manager, David Hughes puts it, the previous generation of Mazda3 was launched in 2003, during a period when unemployment in Australia was around six per cent. The new car is being launched now amid much worry that employment might go beyond five per cent. Hughes feels that from the point of view of a car company that has been kicking a few goals lately, that worry is largely misplaced.

"Five per cent or eight per cent unemployment... You've got 95 or 92 per cent of people who've got a job. Three per cent interest rates, the transaction price and the changeover -- and that's what people look at -- means when you borrow money to pay for [a new car], you're paying less for it than you were a couple of years ago."

In other words, Hughes is going with Mazda's own slant on the 'never a better time to buy than now' angle. The twist for Mazda is that a prospective market of 92 per cent employed is not statistically much worse than a market of 95 per cent employed. In consumer confidence terms, it's mostly a case of having nothing to fear but fear itself.

There also appears to be a certain amount of 'gut feel' in Mazda's forecast that the local market will pick up, based on Hughes' following remark: "I think the Aussie make-up is that they just get sick of bad news."

"Our strategy is to emerge at the end of this in a better position, no matter what the market's [doing]," says Hughes. The company had run out all its old stock of the previous model Mazda3, forcing an earlier introduction of the new model than originally planned. According to Hughes, the Mazda3 is not the only model in the company's portfolio comprising all-new stock, for that matter. That leaves Mazda in the enviable position of maintaining effective stock levels without having to clear old inventory, even if things don't go exactly to plan.

"Because we've got no old inventory... if it turns to [expletive deleted] -- and we don't think it will -- then we don't have to put [orders] back in, in the second quarter or third quarter," says Hughes.

"Because I actually believe that demand is going to be higher than what the supply is... It's as simple as that."

Much like a NASCAR racer sweeping down off the high banking against the G-forces to gain speed, Mazda is ensuring its supply can match or exceed anticipated demand if/when the buyers re-enter the market. It's a counter-intuitive analogy and entirely dependent on the economy turning the way Mazda wants it to do, but if all goes to plan, the company will slingshot out the other side with more market share. And if the importer can snare more market share during the slow times, it will be harder for competitors to claw back the share they've lost to Mazda when they acknowledge that the good times have returned.

Mazda's strategy will apply across the entire product range, not just Mazda3, and the company is bringing forward orders to the tune of 20,000 units initially. Since the new '3' will likely continue as the most popular car in the range, expect it to comprise a large component of those forward orders. That being the case, Mazda is about to make a fairly big splash in the VFACTS small-car segment.

"We're not targeting Corolla," Hughes told the Carsales Network, but the Mazda3 is the best seller for the company and there's only one car ahead of it in the small-car segment. Mazda is basically banking on its competitors short-ordering stock for the remainder of this year and if you, the new-car buyer, can't be supplied with a Corolla (or a Civic or Impreza) of your choice, you might pay a visit to the local retail outlet flogging your second choice instead. Hughes has his fingers crossed that the second choice for consumers will be a Mazda3. Who knows, if enough 'second choices' are sold, they may yet become the 'first choice' option.

All in all, it looks like being a big year for Mazda and the new '3' will lead the charge. Retail sales of the new-generation small car commence this week.

Key to pics: Blue hatch (WYH 985) with automatic and leather trim is Mazda3 SP25, grey hatch (WTE 973) with manual transmission is Mazda3 Maxx Sport, red hatch (WTE 974) with auto is Mazda3 Maxx and blue/grey sedan (WTE 975) with manual is Mazda3 neo.