Flooded Showrooms Overshadow Brisk Mazda Sales

REYKJAVIK, Iceland – Mazda enjoyed a good month in August, with North American sales of 22,632 vehicles representing a 14.7% boost over year-ago.

Even before the sales figures were released, Mazda North American President and CEO Jim O'Sullivan was bullish in an interview with WardsAuto at the media launch here of the all-new CX-5 cross/utility vehicle.

Mazda North American President and CEO Jim O'Sullivan speaks at CX-5 media launch in Reykjavik.

“Look at the quality of our business: Our residual values are still high; our incentive spending is substantially below our competition; and our business is steadily improving,” he says. “We’re up year-over-year.”

Through 2010, Mazda incentives significantly lagged the industry, but in 2011 that gap has narrowed, according to Edmunds’ True Cost of Incentives report, which takes into account all manufacturers’ incentives programs, including cash rebates to consumers and dealers.

For the month of August, Edmunds pegs Mazda incentives at $2,461 per vehicle, compared with $2,316 for the industry at large.

Mazda delivered 165,794 vehicles in the U.S. through the first eight months, up 6.1% over like-2010, with a market share of 2.0%, according to WardsAuto data. But O’Sullivan sees room for improvement.

“We’ve lost a little bit of market share, but we haven’t gone after the fleet business very aggressively,” he says. “A lot of our competition has a lot less availability (of product) than we do right now, and they still haven’t backed off the incentives that much. We’ve seen a little decline in Canada, but we’re up substantially in Mexico.”

Of more immediate concern is the impact of Hurricane Irene in the U.S. and its torrential downpour along the East Coast. A number of auto dealers have suffered losses, including Wayne, NJ, Mazda retailer Kevin Dipiano.

His facility was swamped by the Passaic River, which crested at a 100-year high as a result of the storm. Some reports say the river was 13 ft. (4 m) above flood stage at one point.

“Kevin’s one of our great dealers, O’Sullivan says. “We’re trying to assess the situation right now.”

Initial reports suggest the dealer lost more than 40 vehicles. “Those vehicles won’t get sold,” Dipiano says. “They will be scrapped. I know there were other competitive dealers in the area who lost a significant number of vehicles also – it wasn’t just us.”

On the upside, O’Sullivan says Wayne Mazda had very little inventory because a shipment of new vehicles had not yet arrived. That shipment will help Mazda dealers who still are recovering inventory from the March earthquake and tsunami that severely impacted the Japanese auto industry.

The earthquake threw domestic production into flux, with some auto makers still not back to full speed as supply disruptions and electricity shortages drag on.

At the time of the earthquake, O’Sullivan says, Mazda North American dealers were beginning to stockpile new vehicles.

“Our inventories were literally getting built up to take advantage of what we saw would be a recovering industry,” he says. “Fortunately for us, we had significant inventory on the ground at the end of March and on the boats on the way over when the earthquake and tsunami hit.”

In addition, the auto maker’s manufacturing facilities in Hiroshima are located in the south, so they were not impacted as severely as those in the north.

Despite the challenges, Mazda managed to pull ahead by several months the launch of the Skyactiv 2.0L gasoline direct-injection 4-cyl. engine in the Mazda3 subcompact, which is expected to achieve 40 mpg (5.9 L/100 km) on the highway.

The refreshed Mazda3 goes on sale next month, but it initially was scheduled to arrive after the first of the year.

“That worked out really great for us,” O’Sullivan says, “because now we can separate the Mazda3 Skyactiv and then follow it up with CX-5,” which goes on sale in early 2012.

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