Mazda to Enter Luxury Market With 2 Sedans : Automobiles: The Amati, designed in Irvine as was the Miata, hasn’t yet been priced but will probably range between $25,000 and $45,000.
Less than two weeks after two European luxury car makers pulled out of the crowded U.S. market, Mazda Motor Corp. unveiled a new luxury division called Amati that will sell its pricey sedans in the United States beginning in 1994.
Pricing for the two proposed Amati sedans has not yet been set, but Richard Colliver, general manger of the Amati division, said the car would be competitive with other luxury Japanese models priced between $25,000 and $45,000.
Colliver said Amati, headquartered in the Irvine complex of Mazda Motor of America, hopes to open 50 dealerships in areas that target upscale American consumers with family incomes of $75,000 or more. The cars, which will be built at a new plant near Mazda’s current assembly factory in Hofu, Japan, will compete with Toyota’s Lexus, Nissan’s Infiniti and Honda’s Acura, as well as European luxury models.
Mazda has been developing plans for the Amati Division for more than two years under a tightly controlled program called Pegasus Task Force, which operated out of separate offices at the company’s Irvine campus.
Colliver, who headed the program, joined Mazda Motor of America in 1972 as Midwest district manager. Before taking on the Pegasus/Amati project in 1989, he was senior vice president for the company’s Western region, encompassing 31 states. Mazda has acknowledged all along that is has been studying the possibility of launching a new luxury line. But when word began circulating in the industry last year that Mazda had decided to go ahead with the new division, officials in Irvine issued firm denials.
Now that the wraps are off, industry analysts say they expect Mazda to conduct a major campaign to build consumer demand for the new cars. As with Lexus and Infiniti, part of that campaign apparently will be based on suspense--no technical or style information about the cars was released Monday.
But Mazda expects a big portion of its Amati line to be sold in the United States, and thus it is likely that stylists at Mazda Research and Design of America had a big say in designing the line, said George Peterson, president of AutoPacific Group in Santa Ana.
The stunningly successful two-seat Miata roadster that Mazda introduced in 1990 also was conceived and designed at the Irvine design center. And while no one is reading much except coincidence into it, several wags have noted that Amati is an anagram of Miata--perhaps an unconscious attempt by Mazda officials to visit some of the Miata’s good fortune on their new division.
Some industry watchers suggest that Mazda will need all the luck it can get. While the company has a reputation for turning out well-engineered cars with a lot of consumer appeal, the luxury car market has become an increasingly tough one in recent years.
As the new federal luxury tax, the recession and excess supply have combined to weaken sales and profitability, the luxury market has grown increasingly competitive. And as more auto makers enter the fray and those already in it expand their product lines, analysts say the battle for customers in the luxury segment will continue to heat up.
“During the 1980s, there was very little price competition in the luxury segment,” said Susan Jacobs, an analyst with the Little Falls, N.J.-based consulting firm of Jacobs Automotive, which specializes in luxury cars. “Now, everyone wants a piece of the pie.”
According to Jacobs, 20 new nameplates have been introduced in the luxury segment since 1986. This year, Lexus, Infiniti and Acura are unveiling new models, while General Motors Corp.'s Cadillac division, Ford Motor Co.'s Lincoln-Mercury division and BMW of North America are all bringing out new versions of key models.
Since Acura’s 1986 entry into the U.S. market, followed by Lexus and Infiniti in 1989, the Japanese auto makers have gained market share at the expense of the Big Three and the Europeans. In the first five months of this year, the Japanese market share increased to 31.8% from 23.5%, while the Big Three’s share slipped to 49.7% from 59%.
One Japanese manufacturer that has eschewed setting up a separate luxury line is Mitsubishi Motors Corp., which markets its top-of-the line Diamante sedans through existing Mitsubishi dealerships.
“In today’s environment, when it is difficult for a lot of car dealers and many manufacturers to make a profit, it is very difficult to launch a whole new franchise. There is a tendency to shortchange the one you already had while you are spending your dollars to promote the new one,” said Rick Lepley, vice president of sales at Mitsubishi Motor Sales of America Inc. in Cypress.
He singled Toyota and its Lexus line out as an exception. “It’s effort to launch Lexus did not in any way adversely affect Toyota sales. But as you look at sales figures, it is hard to make that statement about Honda and Acura and Nissan and Infiniti,” Lepley said.
“So we decided that the best course was to have one dealer body to manage and one identity to promote.”
Sterling Motor Cars and Peugeot S.A., two recent casualties of the fight for luxury market share, pulled out of the U.S. market earlier this month because they couldn’t sell enough vehicles. Sterling sales have fallen 28% so far in 1991, compared with the same period last year. Peugeot sales have fallen 17%.
“I think that was a good decision for them” to leave the United States, Jacobs said. “They were small operators. There wasn’t any way they could come up with the kind of marketing money they needed. It was just too expensive for them (to compete) here.”
Fighting to regain its share, Cadillac has revamped its El Dorado and Seville to appeal to the younger generation that has largely deserted domestic makers for the Japanese. The main reason auto makers continue to forge into the dense and sometimes treacherous market is fairly simple: profits.
“You make a lot more money selling a $40,000 car than you do selling a $10,000 car,” said Christopher Cedergren, an automotive marketing consultant with AutoPacific Group.
But the flip side of the auto makers’ quest for a higher profit margin--intense price competition--may be good news for consumers. As the volume of luxury cars grows to more than the market can handle, manufacturers are forced to offer cash incentives and low financing programs to attract customers. The level of incentives has already increased in the luxury market, and Jacobs expects incentives to become a more permanent feature of the luxury segment.
Despite the fierce competition, analysts don’t expect to see the ranks of luxury car makers significantly thinned in the near future. As the baby-boom generation gets older and more affluent, analysts say the market will continue to grow.
Before deciding to enter the tight luxury market, Mazda said it performed intensive research on every aspect of the new venture--including the name of the division, which company officials said comes from a Latin word for “to love.”
The name is meant to evoke such varied sensations as “the multicolored tapestry of a sunset,” “the delicate feel of fingertips on cashmere,” “the tartness of a ripe apple” and “the loving aroma of Thanksgiving turkey roasting in Grandma’s oven,” according to company literature.
Whether customers will be able to discern all the subtleties embodied in the name has yet to be seen, but analysts say translating the distinct image that the company is aiming for in the nameplate into the product will be crucial to its success.
“All bets are on that the Amati nameplate will be successful,” says Cedergren. “The Japanese have a good track record, and we believe the luxury segment will continue to be one of the fastest-growing segments of the market.”
Chip Young, who owns a Mazda and Acura dealership in North Hollywood, agrees. Young and his brother are planning to apply to be one of Amati’s 50 dealers in 1994.
“There are a lot of voices out there calling to the upscale customers, and whether Mazda can come in and make it remains to be seen,” Young said. “But we’re going to apply to get one of those franchises. We think it can be done.”
But not all existing Mazda dealers are so assured.
“I’d want to look at the whole package before making a decision to go after one of the franchises,” said David J. Phillips, president of David J. Phillips Buick/Pontiac/Mazda in Laguna Hills.
“Anything in auto retailing today is difficult. I don’t care whether it is a luxury car of an entry-level car, the whole retailing field is difficult in this economy,” he said.
Times staff writer John O’Dell contributed to this story.