Mazda pursues U.S. price hikes as profits plunge

Mazda pursues U.S. price hikes as profits plunge

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TOKYO — Mazda is pursuing higher sticker prices in North America on the back of new product such as the CX-50 compact crossover and as a way to offset an explosion in raw material prices.

The shift, combined with record-low incentives for the brand, is helping the Japanese automaker deliver on its strategy of burnishing its image and moving upmarket.

Compared with the older CX-5 compact crossover, for example, the CX-50 that was introduced this year is fetching loftier purchase prices, partly by luring buyers at higher trim levels.

Meanwhile, Mazda began raising regional prices in April to cover soaring input prices.

Speaking at Mazda’s financial results announcement Tuesday, global sales chief Yasuhiro Aoyama said U.S. demand for Mazda was robust enough to support the price hikes. Mazda raised prices as much as $350 and expects price increases again with new model introductions.

“To offset higher raw material and logistic costs, we have raised prices in markets where we can do so, including the U.S.,” Aoyama said. “We will fetch higher prices as we continue to monitor market competition and reassess the competitiveness of our products.”

Mazda is betting on an upmarket portfolio shift that hinges on a global blitz of new large crossovers that follow the CX-50. The strategy will begin unfolding this year in Europe and Japan with the launch of the two-row CX-60. That model will be followed by two U.S.-focused stablemates, the CX-70 and CX-90, starting next year.

A three-row CX-80 is also in the mix, for Europe, Japan and other global markets.

Aided by ultratight demand, Mazda’s incentive spending in the U.S. fell to a record low of $650 per vehicle in July, Aoyama said. North American sales plunged in the April-to-June quarter on pinched production. But Mazda expects regional volume to increase for the full fiscal year.

“Although there are negative factors such as inflation and rate hikes, we think consumer sentiment and car demand will remain strong since used-car residual values have been at high levels and we have been unable to deliver vehicles fully over the past few years,” Aoyama said.

“We will continue to pursue raising vehicle prices, along with efforts to improve the model mix and keep low incentive levels,” he added.

Aoyama’s assessment came as Mazda Motor Corp. reported financial results for the fiscal first quarter ended June 30. Hammered by lost production and slumping sales, Mazda posted a ¥19.5 billion ($143 million) operating loss in the period compared with a profit the year before.

Spiraling costs for raw materials such as steel and precious metals further undercut earnings. Skyrocketing prices chopped some ¥30 billion ($220 million) off quarter operating profit.

A beneficial foreign exchange rate was the biggest tail wind for the carmaker based in Hiroshima.

The Japanese yen’s dramatic weakening against the U.S. dollar and other currencies added ¥17.9 billion ($131.3 million) to the bottom line in the April-to-June period. That was enough to drive a 32 percent increase in net income to ¥15 billion ($110 million).

Worldwide output slumped 22 percent to 209,000 vehicles as pandemic-related lockdowns in Shanghai crimped the supply of semiconductors and other components for Japanese plants.

In turn, global wholesale volume slumped 36 percent, to 166,000 vehicles. Shipments to the North American market slumped 37 percent to 64,000, as European volume fell 57 percent.

“The first quarter was off to a slow start as expected due largely to a production decline from parts shortages from China,” Senior Managing Executive Officer Masahiro Moro said. “But the quality of sales and unit sales have improved, and our new models are well received. So we have high resilience and will take the necessary steps to recover as soon as possible.”

Mazda said production is already rebounding, with the resumption of activity in Shanghai. It predicted a 19 percent increase in wholesale volume to 1.18 million vehicles this fiscal year.

Mazda forecast that uncertainty in global semiconductor supply will drag into 2023.

But the company said it is taking countermeasures to bolster procurement, including pursuing dual sourcing, signing annual purchasing contracts and using more general purpose chips.

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