After Mazda3 stumbles, Mazda relies on CX-30 for an upmarket boost

The Mazda3 is meticulously engineered.

The new generation that debuted for the 2019 model year uses windshield-washer nozzles attached to the wiper arms so the spray is cleared more quickly than with hood-mounted nozzles. A-pillars are reshaped to improve forward visibility. Mazda carefully removed design clutter in the headlights as part of its "less is more" aesthetic. And there are many more examples.

But perhaps less successfully engineered was the timing of the vehicle's launch, since the compact sedan and hatchback are the first vehicles designed around Mazda's aspiration to become more premium. The timing was problematic, some dealers and analysts say, because Mazda is trying to use a car to do a crossover's job: drive sales gains and elevate its image.

In fact, the Mazda3 is among the brand's poorest sales performers in the U.S. this year and is a significant factor in Mazda's 11 percent sales slump so far in 2019. Through August, Mazda3 sales are down 21 percent from a year earlier, and only the Mazda6 midsize sedan has experienced a bigger slump. The Honda Civic, a close rival to the Mazda3, has posted a 1.3 percent sales increase so far this year.

The Mazda3 remains the brand's No. 2 U.S. seller after the CX-5 compact crossover, which is down 2.7 percent in the first eight months of the year. The Mazda3 is also an iconic Mazda vehicle, with more than 6 million sold since its 2003 debut, according to the company. But the new generation's launch in March has generated mixed feelings.

While the revamped Mazda3 is a far better vehicle with extensive "premium" features such as optional leather in the interior and all-wheel drive, it's also a relatively small car with a price that has risen a couple thousand dollars.

Mazda says it's a better value based on the additional content, but consumers in the segment remain highly sensitive to price.

"It's no secret that the entire passenger-car market is struggling," said Jessica Caldwell, executive director of industry analysis at Edmunds. "That said, the compact-car segment still has a base of consumers who are looking for new, basic transportation at an affordable price. Unfortunately by moving the 3 upmarket, Mazda has alienated a big part of that very consumer base."

With a transaction price hovering around $25,000, Caldwell said, "the 3 is not only more expensive than its compact car counterparts but encroaching on small SUV pricing. This will only limit Mazda's pool of consumers. An upscale, small car from a mainstream brand is a fun idea, but it will likely not move beyond small volumes in current market conditions."

Mazda also touted its new Skyactiv-X gasoline engine, which uses compression ignition like a diesel and offers a better combination of power and efficiency. But Mazda isn't yet bringing the engine to the U.S. So far, it's slated for use in Europe first. Mazda is offering only a carryover engine on the Mazda3 with no big gains in power or miles per gallon.

"Mazda's premium play isn't a bad idea, but premium features have to come on top of a well-executed foundation," said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book. "They can't be used to counter issues like a small size or mediocre powertrain, because those are more important to most buyers than supple leather seating or a head-up display."

The redesigned Mazda3 has received high praise from automotive reviewers, including a "Biggest Bang for Your Buck" award from the Greater Atlanta Automotive Media Association.

But its lack of sales success means that Mazda is bound to go through some growing pains as a newly "premium" brand and may have to adjust its prices or its expectations.

"Mazda is in the difficult position of striving for premium in a market that still sees it as mainstream," Brauer said in an interview via email. "Crossing that bridge will take years, and if Mazda's pricing remains above comparable models, from brands that have long been seen as direct competitors, it's reasonable to assume sales will suffer in the near term."

Mazda has help on the way in the new CX-30 compact crossover that is built on the same platform as the Mazda3, but in a more consumer-friendly package. Dealers say the automaker is working on pricing for the CX-30 that will slot between the CX-3 subcompact crossover and the CX-5 compact crossover. It should go on sale early next year.

Jim Bagan, a past chairman of the Mazda National Dealer Advisory Council who has sold Mazdas for 32 years, said the CX-30 will be critical for sales and to gauge consumers' acceptance of the brand's upmarket aspirations.

"Candidly, the seventh-generation Mazda3 is our first real premium product introduction, and it's been tough for us to gauge the success or failure of it because it's in such a sliding segment right now," he said.

So whereas the Mazda3 gets something of a pass on sales success given consumer tastes, the coming CX-30 likely will not. Bagan, reflecting on future sales generally and the CX-30 specifically, summed it up. "So, this time next year, if you and I are having the same conversation, we're in trouble."