Toyota To Sell Rebadged Next-Gen Mazda2, Built in Mexico

Here’s the scenario:  Mazda is a small global player lacking the scale and resources to compete in an incredibly expensive, incredibly tough global auto market.  Its production is currently way, way too Japan-centric (that’s a problem because of the strong yen and high costs).  It needs more non-Japan production, so it is building a new plant in North America, in Mexico, in a plant was designed to produce 140,000 vehicles per year, which is below the typical threshold for profitability.

Meanwhile, Toyota is also looking for more production capacity in North America to escape the strong yen.  Because it requires a major investment to build a new greenfield plant when it doesn’t need an entire plant’s worth of capacity.  Toyota also wants to broaden its model lineup.  The solution?

Pairing up with Mazda in Mexico, of course!  Toyota will contribute funds to expand Mazda’s plant capacity from roughly 140,000 cars per year to 190,000 (that’s 50,000 extra cars, for those of you who are bad at math).  In return, it gets a model based on the next-generation Mazda2, to be sold in the U.S. and Canada.

The headline isn’t exactly accurate.  It doesn’t sound like the Toyota2 (not its real name, of course) will be a true rebadge, but rather a unique body built on next-gen Mazda2 underpinnings.  The Toyota variant will not replace an existing model, but is intended to broaden Toyota’s lineup.  Since the current Mazda2 competes directly with Toyota’s unloved Yaris in the subcompact segment, it remains to be seen how exactly the Toyota2 would be differentiated from the Yaris.  Plus, if buyers can opt for a Mazda2 (with Toyota badging) or a Yaris in the same showroom for presumably similar pricing, why on earth would they pick a Yaris?

One scenario could be that Toyota will position its “Toyota2” as a sporty hatch, similar to the way the Matrix complements the Corolla, despite sharing the same [very pedestrian] underpinnings.

It’s not clear whether the new Mazda2/”Toyota2″ will be jointly developed by the two companies, or whether Toyota will just design the body and interior while Mazda handles chassis and powertrain development.  The current Mazda2, of course, shared much of its development work with the Ford Fiesta.

Interestingly, though Mazda and Toyota do not currently have any capital tie-ups (such as cross-shareowning like Nissan and Renault have), this is not the only ongoing project between the two companies.  Mazda and Toyota teamed up  earlier to develop a hybrid drivetrain, set to debut next year.  Before Ford relinquished managerial control of Mazda, Mazda shared hybrid technology with Ford.

Mazda’s other big tie-up with another automaker, of course, is working with Alfa Romeo to codevelop the next-generation Miata and to bring the Alfa Romeo Spyder back to life.  The Spyder and Miata will also not share bodies, and probably not engines either, and will hit the market around 2015.

It seems that Mazda is doing what it needs to in order to survive as a small fish in a big pond.  The company has quite a bit of engineering expertise, and it makes sense to capitalize on that to get more bang for its R&D yen bucks.  I’m a little surprised that no larger automakers have stepped in to purchase control of Mazda, but the answer may be that its combination of high production costs (thanks to producing three quarters of its cars in Japan) and relatively small exposure to emerging markets make it less attractive than other possible partners.  Still, if Sergio Marchionne is correct and the minimum size for a globally-aspiring automaker is 6 million sales, Mazda will have to forge even more partnerships in the coming years.