Mazda returns to subcompact race with new Demio

By TOKYO, Aug 7 Chang-Ran Kim writing for Reuters reported that It may not be as cute as Nissan's "March" or have the pizzazz of Toyota's "ist".

But the fully remodelled Demio subcompact could be Mazda Motor Corp's ticket back into Japan's red-hot market for small cars after years of trailing its imitators and give it a much needed sales recovery at home, analysts say. ADVERTISEMENT

ew model, available in three styles to suit a range of drivers from families to single men and women.

The newest member in Mazda's line-up is important because it could set the tone for profit growth at the automaker.

After spilling red ink during much of the 1990s, Mazda has spent much of the past few years mending its tattered finances under the guidance of U.S. partner Ford Motor Co instead of competing by rolling out new models.

Although Mazda staged the biggest turnaround in its 82-year history last business year thanks to cost cuts and a favourably weak yen, sales at home have been stagnant due to a dearth of new products, particularly in the popular subcompact segment.

"As you know, small cars are the most dynamic segment -- in fact the only dynamic segment in Japan," Mazda President Lewis Booth said at the unveiling. "The Mazda Demio is going to make a key contribution to our growth target."

Bigger rivals have zoomed ahead with hit subcompact cars even in the generally downbeat domestic market -- Toyota Motor Corp with the Vitz/Yaris and "ist", Honda Motor Co with the Fit/Jazz and Nissan Motor Co with the March/Micra.

With the new Demio, Mazda will be back in the race, though maybe not in a dominant position, analysts said.

"It's got the strength to compete against the Fit and March," said Shigeharu Kimishima, an auto analyst at Kokusai Securities.

In a sweeping facelift from the original model and in line with Mazda's "Zoom Zoom" marketing campaign to give its cars a brand new identity, the new Demio is more focused on comfort and playfulness rather than plain functionality, Mazda said.

The three models -- Cozy, Sport and Casual -- are priced between 1,070,000 yen and 1,535,000 yen ($8,850 to $12,690).

SUCCESS CRUCIAL

Analysts said the "Cozy" model could be promising in setting the Demio apart from rival cars due to some unique features, including a semi-transparent canvas top which lets in natural light even when it is closed.

Success with the Demio, one of three new Mazda cars to hit the market this year, is crucial for the automaker.

Although the Mazda6 (Atenza) sports sedan has been selling exceptionally well since its launch in May, lower output volumes mean it isn't enough to provide the extra nudge needed for Mazda to break out of a trend of falling domestic sales.

The automaker's domestic sales target for the Mazda6 is 2,500 per month, compared with 7,000 for the new Demio.

"For Mazda's domestic sales to swing to positive growth, the Demio is indispensable," Kimishima said. "The Demio could put to work the momentum the company got with the Atenza."

Larger production volume for the Demio also means lower fixed costs as factories work closer to full capacity, making up for some of the loss in profit margin due to cheaper price tags.