00:00Tom Donnelly, CEO of Mazda North America. Tom, I don't envy you at all. A great and beautiful car,
00:06but such a confusing environment. How do things change for you after this weekend and Friday's
00:12events? Yeah, thanks. First of all, good morning. Yeah, it's a dynamic time, but I would say
00:19we've developed muscle memory over the last four or five years with all the shifts that have
00:23happened in geopolitical and economic, things like that. The news from Friday with the
00:29Supreme Court ruling, it's a big development, clearly. But in terms of the big impact for
00:36automotive anyway, it's the Section 232 tariffs, which are still the primary impact. So what the
00:43IEPA tariffs that came down on Friday in terms of the automotive impact for us, it's about
00:485% of the overall impact that we're faced with with the Section 232 tariffs. So as we continue to
00:55work through that, working with the administration, our various industry associations, we're really
01:01focused on what we can do to try to make adjustments there as well. How much flexibility do you have
01:07to absorb any incoming costs versus passing them on? Yeah, it's decisions that we've been making over
01:15the last six to nine months. For instance, we've been working very hard to ramp up our production in
01:20our Alabama plant where we build CX50. So CX50 is built specifically for the U.S. market. We have about
01:27120 to 130,000 units of production capacity there right now. We're trying to accelerate to 150, which is about
01:35the ceiling of our production capacity there. We feel like we'll be there right around the end of this year.
01:41So that
01:42model is performing well. We are gaining double digit sales volume year over year. So we're optimistic about that.
01:48And then you mentioned the new CX5. We feel like in terms of the outlook for this year, that's going
01:53to be a nice
01:54shot in the arm for us. It's our best selling model. So we're really optimistic about the outlook for 2026.
02:00You mentioned your Alabama plant that you're ramping up capacity and output there. Are you looking at broadly
02:06expanding it? Are you going to be investing more in that plant?
02:10It's on the horizon for consideration. But as I said, we have about 20 to 30,000 units of capacity
02:18that
02:18we're looking to try to optimize in the next 12 to 15 months or so. So we feel like that's
02:25our near
02:25term priority. Well, there's also the Mexican-made Mazda 3 starts at just under $26,000. And that's
02:33also something that faces tariffs too. What does the strategy look like for that car, Tom? I'm assuming
02:39you're probably losing money on selling that car at such a cheap price point.
02:44Yeah, it is a challenge. And so we've made some decisions there. So we built both Mazda 3 as well
02:50as CX30, which is our small CUV. And in an industry where the average transaction price is north of
02:56$50,000, trying to find affordable options for consumers is really important. And frankly,
03:03you mentioned Mazda 3. Over the last three or four months, we've been able to gain double-digit sales
03:08month over month with our Mazda 3. And one of the reasons for that is we switched our production
03:14from Mexico to Japan, where we have a different level of tariff impact there. So that becomes more
03:21profitable for us, but it also allows us to increase our production capacity and provide more
03:26options in that 25 to, let's say, 35-ish range for consumers where there is a lot of interest in
03:34demand in the market right now. Where does demand stay for EVs, Tom? You've pushed out your next EV to
03:41at least 2029. You're leading into hybrids. What's driving that? Is it demand? Is it economics? Is it
03:47policy risk? All of the above, right? So we've been what we call an intentional follower in terms of
03:55BEV transition. So we have hybrids, as I mentioned earlier with our CX50. So we have a solution there. We
04:05have
04:05plug-in hybrids with our large platform products. And the next generation of CX5 that we're introducing now will
04:11also come in a hybrid in about 12 months. That's really where the market is right now. We're seeing solid
04:18demand and
04:20acceptance of hybrid powertrains. And our plug-in hybrids represent about 10% to 15% of our sales mix
04:26in our
04:27large platform products. So that's where the market is right now. The BEV demand is 8% to 10%. So
04:33we feel
04:34like we're making the right call in terms of powertrain based on consumer demand here in the U.S. market
04:40anyway. Hey, Tom, I'm going to do my best Matt Miller impression here because he is the car expert.
04:46He knows about everything. But a conversation I've had with him is this idea of cars that become
04:51over-engineered. I was looking at the CX5 and it looks so slick. The center console, kind of like a
04:57big screen. I just wonder why you decided to go down that route and not put buttons, not have tactile
05:03things. Like, did you confront this concern of over-engineering of the car? Yeah, great question.
05:09And a question that we have gotten a lot, but I would say it's based on our owner feedback and
05:17where
05:17the market has gone overall. So with CX5 specifically and the HMI system in there, there are multiple
05:25options. So there's the touch of the screen. There's also a very intuitive voice command, as well as
05:32steering wheel controls. So we feel like that provides the flexibility and the usability that will
05:38allow consumers to interface with it in the way that they choose.
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