Mazda's Upmarket Push Finally Makes Sense Thanks to the CX-90

Mazda’s grand upmarket strategy is finally paying off, Tesla’s latest recall in China is really more of a software update and Toyota has been playing fast and loose with its Japanese customers’ data for 10 years. All that and more in this TGIF edition of The Morning Shift for Friday, May 12, 2023.

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1st Gear: Big Mazda Things Happening in North America

Mazda is finally realizing the potential of a strong brand that also sells the kinds of vehicles Americans want to buy; i.e., big SUVs. It’s enjoyed the former for quite a while, but the latter really came into focus with the CX-90, which is admittedly moderately attractive and desirable for a big grocery-getter. Car shoppers are realizing this, which is why Mazda’s numbers are trending up these days, and it’s also having a tough time getting keys into customers’ hands. From Automotive News:

Mazda expects wholesale deliveries to jump 13 percent, or by 140,000 units, in the current fiscal year as it launches new nameplates such as the CX-90 and ramps up production.

About half of the projected increase is shipped out of Japan, incoming CEO Masahiro Moro said Friday.

But a combination of factors is putting a pinch on shipping logistics, he said.

During the pandemic, many ship companies decided to replace their fleets with more fuel-efficient vessels, and there is now a shortage of ships as new ones are being built.

Meanwhile, exploding auto exports from China are gobbling up space on available carriers. Last year, China exported about 3 million vehicles; this year exports could rise to 4 million, Moro said as Mazda announced its full fiscal-year financial results.

“This has led to more competition for ships,” said Moro, the former U.S. regional boss for Mazda who takes the global helm from current CEO Akira Marumoto in June.

“So, we are working hard to secure ships from Japan,” he added. “We are consulting with ship companies and working to standardize our shipping schedule as much as possible.”

Shipping is a headache for Mazda, because it imports about two-thirds of its U.S. products from Japan. At least it’s making far more money on every delivery it’s able to make, thanks to the CX-90:

Over the past four years, Mazda says, the brand’s average transaction price in the U.S. has risen by $7,000 – topping out at $33,700 in 2022, compared with $26,700 in 2018.

The shift drove Mazda to record-high annual revenue in the fiscal year ended March 31, 2023, even as global sales shrank to 1.11 million vehicles, from 1.56 million four years ago.

April’s introduction of the large-size CX-90 will further stoke U.S. sales while moving the brand’s position further upmarket. Meanwhile, output of the CX-50 will reach full swing in the fall.

“We hope to drive strong growth centering on our new product launches,” global sales chief Yasuhiro Aoyama said while announcing Mazda’s financial results. “We can achieve that.”

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Mazda’s 2022 net income was a whopping 75 percent better than 2021’s, and likewise its operating profit rose 36 percent over that time. Mazda has been angling itself upmarket for years now, but it never had a product expensive enough to really benefit from that association. Now it does.

2nd Gear: Big Tesla ‘Recall’ in China

Tesla must issue an over-the-air software update to every car it has sold in China — that’s 1.1 million vehicles — due to an alleged acceleration and regenerative braking defect. I say “alleged” because this doesn’t really sound like a defect, at least the way it’s been reported. From The New York Times:

The issue involves the vehicles’ regenerative braking system, which generates electricity from the car’s motion when the driver takes a foot off the accelerator. The State Administration for Market Regulation said in a statement that the cars might not provide a warning when the driver presses hard on the accelerator for a long period.

The defect could lead to increased risk of collisions, the statement said.

Tesla said it would fix the vehicles with a software update sent wirelessly to the vehicles, the regulator’s statement said.

Tesla’s patch will allow drivers to set the level of regenerative braking they prefer, which will impact how the car slows down when the accelerator is released. It will also issue a warning when the accelerator has been pinned for too long. The EV maker did away with the choice to turn off one-pedal driving — effectively high-regeneration mode — worldwide starting in 2020.

According to Reuters, this was an especially controversial decision in China, where some customers “complained it could confuse drivers and increase the risks of misstepping on accelerators.” A crash in the Guangdong province last fall involving a Model Y may have played a role in the government’s decision, when a driver lost control of their vehicle but never once engaged the brakes, killing a motorcyclist and high-school-aged girl on a bicycle.

Basically, Tesla wanted to force everyone to operate their cars in the mode where they run most efficiently, which is completely unlike the way conventional cars people are accustomed to driving have behaved for decades. It’s another unwelcome headline for Tesla in China, but at least it can get out of this one without having to physically service any cars.

3rd Gear: Big Toyota Data Leak in Japan

Some 2.15 million Toyota and Lexus owners in Japan have been at risk of having their personal information stolen for an entire decade, the automaker revealed this week. The company’s cloud data service was “set to public instead of private” according to Reuters paraphrasing a Toyota spokesperson. D’oh!

The issue, which began in November 2013 and lasted until mid-April, stemmed from human error, leading to a cloud system being set to public instead of private, a Toyota spokesperson said. It could encompass details such as vehicle locations and identification numbers of vehicle devices, but there were no reports of malicious use, the company said.

“There was a lack of active detection mechanisms, and activities to detect the presence or absence of things that became public,” the spokesperson said in response to why it took time to realise there had been an error.

Toyota said it would introduce a system to audit cloud settings, establish a system to continuously monitor settings, and thoroughly educate employees on data handling rules.

Affected customers included those who signed up for the T-Connect service that provides a wide range of services including AI voice-enabled driving assistance, auto connection to call centres for vehicle management, and emergency support in such cases as a traffic accident or sudden illness.

The story says nothing of Toyota doing anything at all to make up for this disturbingly glaring oversight that risked the collective personal and financial security of its entire customer base, but hey — carmakers just want your data. They’re not in the business of protecting it. That’s for real tech companies!

4th Gear: Big Potential Nissan Executive Shakeup

Nissan Chief Operating Officer Ashwani Gupta was tipped to become the brand’s next CEO, but that’s now in doubt since it’s been announced Gupta will not be reappointed to the executive board when his term expires in June. Per Automotive News:

Gupta joined Nissan’s leadership team in late 2019, when Japan’s No.3 automaker was looking to put an end to a period of turmoil triggered by the arrest and sacking of long-time leader Carlos Ghosn.

Allies of Gupta pressed the board in 2020 to promote him to the role of co-CEO, hoping he would drive the company’s turnaround and improve its relationship with long-term alliance partner Renault SA, but the promotion did not materialize.

Nissan said on Friday Gupta would step down from the board of directors on June 27.

A company spokesperson said it was not immediately clear whether he will be staying on in his role as COO.

This is a rather strange development because, as we learned yesterday, 2022 was surprisingly kind to Nissan. Poor Nissan. Just when you think it’s finally out of the woods, the company’s first not-fugitive leader in two decades backs away from the throne.

5th Gear: Big Volkswagen Predictions About Little EVs

Volkswagen wants you to know that it believes the “cheap,” 22,000-pound (that’s $27,500) electric car is right around the corner, thanks to relatively favorable material costs and economies of scale. Per Autocar, quoting recent comments made by Chief Financial Officer Arno Antlitz at Financial Times’ Future of the Car summit:

“There’s a lot of innovations coming in the technical side. [The production version of the ID.2all concept] will have the first in-house battery cells from our Valencia plant. We’re just ramping up; we will have much more scale by then.

“[We have also seen a slight] improvement or relief on the raw material cost. Look at lithium: it came down. Nickel came down. So from this perspective, we’re quite confident that we can achieve that €25,000 target and at the same time have a decent margin.”

Antlitz hinted that the Volkswagen Group’s ownership of battery designs and manufacturing would be critical, saying that it would be a “decisive factor” in terms of battery availability and cost.

Volkswagen brand boss Thomas Schäfer previously told Autocar that the economies of scale planned – with the new MEB Entry platform spawning more affordable EVs from Cupra as well as Volkswagen and Skoda – would further help to cut costs.

He said: “Now we can do a lot in terms of economies of scale. Within our volume brand group, we’re producing four vehicles along with Cupra and Skoda. That volume will help us to bring prices down to be competitive and also still make money.”

For reference, the not-long-for-this-world Chevrolet Bolt costs $27,495 and Nissan Leaf goes for $29,135, both including shipping but before any applicable state or federal tax incentives. So 22,000 pounds isn’t all that cheaper than the cheapest EVs have been, at least stateside. The difference now is that Volkswagen thinks it can hit that target without sacrificing a profit margin.

Reverse: The First of Many

On this day in 1957 — 66 years ago — A.J. Foyt got his name into the record books for the first time. It would become a trend. Courtesy History.com:

Neutral: It’s Hot Today

It’s supposed to get up to 84 degrees here in eastern Pennsylvania today, and frankly I’m not ready for that. But who cares what I, an anti-summer hermit, thinks. What are you doing to ring in the warm weather, and this weekend in general?