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Mazda’s Pegasus Luxury Car Project Apparently Near Announcement

August 16, 1991

DETROIT (AP) _ Mazda Motor Corp., after years of deliberation, plans to jump into the crowded U.S. luxury car market, a field that the Japanese have already begun to exploit.

Mazda said Friday that U.S. and Japanese officials would brief reporters Tuesday about a ″significant announcement which has been the subject of speculative stories in the business, advertising and automotive trade press.″

Mazda officials declined to comment, but it seemed certain that the announcement concerned the automaker’s ″Pegasus″ luxury-car project. The project was exploring the establishment of a ″second channel″ of Mazda dealerships selling luxury cars.

″There’s been all kinds of scuttlebutt,″ said John Casesa, an auto analyst with the investment firm Wertheim Schroder & Co. in New York. ″I don’t think it comes as too much surprise that they are going ahead with Pegasus.″

Mazda would become the fourth Japanese maker and one of several European and U.S. companies to market luxury cars in America. Each of Japan’s top three automakers - Toyota, Nissan and Honda - make luxury vehicles for the United States, and they have been grabbing a growing share of that market from their European and Big Three competitors.

In the first five months of this year, the Japanese market share increased from 23.5 percent to 31.8 percent, while the Big Three’s share slipped from 59 percent to 49.7 percent, according to figures from Jacobs Automotive Inc., a Little Falls, N.J., research firm.

With Mazda entering the fray, there’s a growing likelihood of further erosion in the market shares held by the European companies and by General Motors Corp., Ford Motor Co. and Chrysler Corp., analysts say.

The increased competition could also hurt smaller-volume luxury carmakers. Last week, Sterling Motor Cars bowed out of the U.S. market, saying there were too many competitors.

″It’s awfully crowded,″ Casesa said. ″The Japanese are by far lower-cost producers than the Europeans so we will continue to see a market share shift from one to the other.″

Luxury cars are important to full-line manufacturers because their profit margins are larger. For other automakers, such as Mercedes-Benz, Porsche and Jaguar, they’re the only cars they sell in the United States.

Honda Motor Co. Ltd. was the first of the Japanese makers to begin selling luxury cars in the United States, marketing its Acura in 1986. Toyota Motor Corp. and Nissan Motor Co. Ltd. followed in late 1989 with Lexus and Infiniti, respectively.

At the same time, however, the luxury car market has been in flux since a federal luxury tax and a doubling of the gas-guzzler tax took effect Jan. 1. Some automakers, specifically Mercedes-Benz, Porsche and Jaguar, were severely stung, while sales of lower-priced Japanese cars remained fairly immune from the effects.

The luxury tax tacked on an additional 10 percent of the price above $30,000. A huge percentage of the Mercedes, Porsche and Jaguar fleets are subject to the tax.

Through the first seven months of this year, Mercedes sales were down 22 percent, Porsche’s sales were off 52 percent and Jaguar’s sales were down 52 percent.

Acura sales were flat, Lexus sales were up 2.4 percent and Infiniti sales, off to a slow start last year, soared 84.9 percent.