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Can Smaller Firms Like Tesla, Mazda Remain Independent?

Fiat-Chrysler Might Be Eyeing Mazda.

With all the talk in the industry about how tough it is for everyone but the German luxury carmakers and the few big companies with massive sales to succeed, it’s surprising that second line players can survive and even thrive.

Mazda, Subaru, and Jaguar Land Rover continue to more than just hang on in there, against all the odds. And Tesla Motors is small and up and coming. If they stumble, it won’t be long before the vultures scoop them up. If they thrive, it will be equally difficult to fend off tempting amounts of gold. Experts see Mazda as a possible target of newly merged Fiat-Chrysler, while Tesla’s success with electric cars must make it a candidate, even though its current stratospheric stock price might put off even the richest buyers.

At the Detroit car show Subaru, owned by Fuji Heavy Industries of Japan and which makes SUVs, conservative sedans, a small sports car, and a few high performance machines, unveiled the new 2015 WRX STI with a 305-hp 2.5-liter turbocharged flat-four cylinder engine.

Mazda, also from Japan, had a strong presence at the show, but didn’t have anything new to offer, although it is pulling out all the stops to sell its new little 3 sedan. British-based and Tata of India owned Jaguar Land Rover also had nothing new to offer, but was wallowing in its news of its best full year global sales performance in 2013, selling 425,006 vehicles, a 19 percent gain over 2012.

Minnows
With Sergio Marchionne, CEO of Fiat, saying sales of six million sales a year are crucial to survival, these minnows don’t look prepared for long-term survival. But experts do expect them to be with us for a while yet, although Fiat may seek to add Mazda to its combination with Chrysler.

“Mazda needs to find a volume partner and I think Subaru will also need to find one, but Subaru seems to be doing better given its unique position in the market place as a differentiated, quirky type of brand. Jaguar Land Rover is doing unbelievably well and is generating some of the best profits in the industry right now,” said Richard Hilgert, analyst with Chicago stock-broker Morningstar.

Is Jaguar Land Rover’s success sustainable?

“It does have Tata’s backing, but it needs more global scale for long term competitiveness,” Hilgert said.

There are also questions about how it might meet tough European and U.S. fuel consumption regulations.

“It will be difficult for Jaguar Land Rover on its own to meet U.S. regulations for 2025 and it will need to invest heavily in new technology to avoid stiff fines,” Hilgert said.

German luxury manufacturers like BMW and Mercedes are busily investing in huge new ranges of small cars to bring their overall fleet average down.

Professor Stefan Bratzel of the Center of Automotive Management in Bergisch Gladbach, Germany, reckons that Fiat-Chrysler needs a good partner in Asia, and that Mazda makes sense.

Tesla most likely target
Jeff Schuster, analyst with LMC Automotive in Troy, Michigan, sees a future for smaller manufacturers, but sees Tesla as the most likely to be the target of predators.

“I think there is a future for the smaller manufacturers. Subaru and Mazda are fairly well positioned and have a niche. Tesla is an up and coming brand with a fair amount of buzz and interest. Jaguar Land Rover is also well positioned in the U.S. market. It comes down to the product and how competitive they can be in segments the play in,” Schuster said.

“Over the years I would expect to see some consolidation though. Too difficult to say which brands will be bought, but I would put Tesla high on that list,” Schuster said.

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