Mazda's New Midterm Plan: Sales Targeted at 1.6 Million Units for 2010
Mazda to increase R&D spending by 30% to introduce
advanced powertrain in early 2010s

  Mazda announced in February 2007 that FY2006 (the period ended in March 2007) marked its 6th consecutive year of sales and profit growth where all profit areas saw record highs. In March 2007, Mazda announced its Mazda Advancement Plan, a new midterm plan for the period covering 2007 to 2010. The plan sets targets of global sales at 1.6 million units (the result of 2006 is expected to reach 1.3 million units) and an operating profit (on a consolidated basis) at 200 billion yen, the equivalent of 6% of sales.

  According to the plans for its vehicle line in the midterm plan, Mazda will create a new Demio, Atenza and Axela, which already underwent full model changes between 2002 and 2003. To introduce a new powertrain by the early 2010s, Mazda will increase research and development spending by 30%, when compared to that of the past four years.

  Mazda will strengthen its production structure by expanding domestic production by 98,000 units, to one million units, in 2007. According to the announcement, Mazda is going ahead with plans to build a new passenger car plant in Thailand, where it has a facility exporting pickup trucks. For its Chinese business based on joint operations with Ford, Mazda will begin to produce the Mazda 3 (Axela) at the Chongqing Plant of Changan Ford Mazda. Mazda will also begin to produce the Mazda 2 (Demio) at the Nanjing Plant in 2007.

■Mazda expects to have consolidated sales of 3.2 trillion yen and operating profit of 158 billion yen in FY 2006

  Sales increased by 9.3% and its operating profit increased by 28.2% between April and December 2006. The full FY 2006 results are forecast to grow. Sales are forecast to exceed three trillion yen for the first time, to 3.2 trillion yen, which is a year-on-year increase of 9.6%. Mazda expects its operating profit to be 158 billion yen (a year-on-year increase of 28.0%). The company is forecasting its net income to be 73 billion yen, a year-on-year increase of 9.4%; however, this would have been a 25% year-on-year increase if the following items had not been factored in: the income derived from the return of employee pension fund that the company paid on behalf of the government in the previous term and a current loss of stock valuations for this period.

  The forecast for the entire FY 2006 show some primary factors contributed to the profit growth: improved product mix through launching the CX-7 and the CX-9 (30.7 billion yen), favorable currency translation (36.1 billion yen), and cost reduction measures (a net effect of 11 billion yen by offsetting increased raw material costs of more than 20 billion yen).

■Reason for increases/decrease in the FY 2006 forecast of operating profit (100 million yen) Volume and Product Mix Exchange rate Improvement of products Cost reduction Sales cost Others Total 307 361 (187) 110 (12) (233) 346 Note: In "Volume and Product Mix", the launch of the CX-7 and the CX-9 contributed to an increase in profit while the drop in number of registered vehicle sales in Japan is responsible for the profit decrease. Cost reductions reflect an increase of more than 20 billion yen caused by the rise in raw material prices such as aluminum. "Others" reflects increases in R&D costs, depreciation costs, and quality-improvement costs.

■The forecast is for consolidated shipments to reach 1.17 million units in FY2006, with global retail sales at 1.3 million units

  Mazda was unable to offset the decrease in domestic shipment volume with an increase in overseas shipment volume, resulting in a slight decrease to 829,000 units from 834,000 units from April to December in 2006. The entire FY2006 forecast indicates a slight increase from 1.149 million units to 1.17 million units. (Global retail sales forecast is 1.3 million units).

■Mazda Advancement Plan for 2007 to 2010 sets global sales at 1.6 million units

  Mazda announced its Mazda Advancement Plan in March 2007, a new midterm plan covering 2007 to 2010. The plan sets the following targets for 2010: global sales of 1.6 million units, with retail sales expected to be 1.3 million units in FY 2006; and consolidated operating profit at 200 billion yen, equaling 6% of total sales. Mazda will continue to cooperate with Ford, placing emphasis on and prioritizing synergies with the company.

■Mazda's 2010 targets under its new midterm plan

	FY 2006 forecasts	FY 2010 targets
Global retail sales	1.3 million units	1.6 million units or greater
Consolidated operating profit	158 billion yen	200 billion yen or greater
Consolidated operating profit margin	4.9%	6.0%

Mazda's press release on 2007.3.22
Notes: 1.	Of retail sales by region, the company expects significant growth in China; increases in North America, Europe and other regions; and stable results in domestic retail sales.
2.	Mazda hopes to attain an 8% profit margin going into the future.

■Mazda's product development strategy: to revamp its core passenger car models between 2007 and 2010

  Between 2002 and 2003 Mazda introduced the Atenza in the CD segment; the Demio and sport model RX-8 in the B segment, and the Axela in the C segment. Then between 2004 and 2006 it introduced new vehicles such as the Verisa, Premacy and CX-7 based on the platforms of the previous core models. Under its new midterm plan, Mazda will continue to grow by focusing on its vehicle lineup. Beginning with the new Demio in 2007, Mazda will introduce the next Atenza and Axela. From 2011, Mazda will introduce next generation product families, which will employ a new generation power train.

■Mazda's product development strategy

	From 2004 to 2006	From 2007 to 2010	From 2011
Outline of Product Strategy	Mazda introduced the CX-7 and the CX-9 based on core platforms developed between 2002 and 2003.	Mazda will launch its next core model families, releasing a new power train and platforms	Mazda will release its next-generation vehicle families by incorporating new technologies. (It will release a new-generation engine and transmission.)
Development spending	381.3 billion yen between 2003 to 2006	500 billion yen (+30%)
Capital investment	267.6 billion yen between 2003 to 2006	400 billion yen (+50%)

Source: Mazda's press release on 2007.3.22

■According to its vehicle-model plans between 2006 and 2008, Mazda will launch CX-7s, CX-9s, and CX-5s (which may possibly be the CX-3)

  In May 2006, Mazda first launched the CX-7, a new crossover model, in North America. By the beginning of 2007 it had released it in Japan, Europe and Australia. Mazda released the CX-7, which has a sports-car style with the practicality of a SUV. Sales of the vehicle in Japan are going well, with 1,800 units ordered within the first month of its launch, about five times its projected monthly sales target. 2006 sales in the US were at 22,000 units.

  In February 2007, Mazda launched the 7-seat CX-9 in North America. Together with the CX-7, these vehicles are positioned as performance sedans. In North America, Mazda will launch the new Tribute, as well as a hybrid derivative, in mid 2007. In 2008, Mazda anticipates launching the CX-5 (which could be the CX-3), as crossover model based on the Axela.

■Mazda's model plan from 2006 to 2008

	Schedule/Region for Release	Overview
New MPV	February 2006 (Japan)	The new MPV is a 3-row, 8-seat multipurpose vehicle. Mazda mounts a 2300 cc engine, with a direct injection turbo engine as standard; and installs a 6-speed automatic transmission on the high-end FF models and 4WD vehicles. This vehicle was developed exclusively for the Japan market; so Mazda has no plan to release it overseas, except in Hong Kong.
RX-8 Hydrogen RE	February 2006 (Japan)	Mazda launched the RX-8 Hydrogen RE, which can be powered by either hydrogen or gasoline. Mazda delivered these vehicles to Idemitsu Kosan and Iwatani Sangyo, energy companies, in February 2006.
CX-7	May 2006 (North America)	Mazda launched the CX-7 in North America in May 2006 and in Japan in December. The CX-7 is a sports crossover SUV which integrates a sports-car design with the functions of an SUV. It is equipped with a 2300 cc direct turbo engine and a 6-speed automatic transmission. Mazda launched the CX-7 in Europe in early 2007 and also in Australia. (In Europe, diesel-engine models are not available.)
MAZDASPEED Axela	June 2006 (Japan)	The MAZDASPEED Axela is a high performance vehicle equipped with a 2300 cc direct injection turbo engine. Mazda launched it as the Mazda Speed 3 in North America, and as the Mazda 3 MPS (Mazda Performance Sedan) in Europe in the latter half of 2006.
Titan	January 2007 (Japan)	Mazda fully remodeled the Titan, a cab-over truck, having loads between 1.5 and 2 tons.
Familia Van	January 2007 (Japan)	(Nissan supplies the AD van on an OEM basis)Mazda improved the luggage compartment and considerably increased the loading capacity of this vehicle. Mazda set its monthly sales target at 300 units.
CX-9	February 2007 (North America)	In February 2007, Mazda launched the CX-9 in North America. This vehicle is a 3-row, 7-seat vehicle. It has a 3500 cc V6 engine (made by Ford) and a 6-speed automatic transmission. While the CX-9 is a sister vehicle to the Ford Edge and Lincoln MKX, it has a 2-inch (about 5 cm) longer wheel base to make it a 7-seat vehicle; a different look; and different type steering to differentiate it from the two sister vehicles. Mazda plans to sell 20,000 units in 2007 and 35,000 units in 2008. The vehicle base price is 29,630 dollars. It will be also released in Australia.
New Tribute	Mid of 2007 (North America)	The new Tribute is a sister model of the Ford Escape, which is produced at the Kansas City #1 Plant of Ford. Mazda will launch the hybrid model also. The company provided the California state fire department with 30 units to use for trial purposes in February 2006 before it launched them.
New Demio (Mazda 2)	September 2007 (Japan/Europe)	The new Demio employs a new platform. It was developed by Mazda, using the B-segment platform of the Ford Group. Mazda will reduce the overall length by 40 mm, making it 100 kg lighter and giving it better gas mileage than the current model. It comes in either 1300 cc or 1500 cc gasoline engine models. In Europe, Mazda will equip a 1400 cc diesel engine in the vehicle.
	(North America)	Mazda will produce the new Demio at its new Thailand plant, planning to export them mainly to North America.
Mazda 3-based crossover	2008	Mazda is considering releasing a crossover vehicle based on the Mazda 3. The model name is likely to be the CX-5 or CX-3.
Box type minivan	(Japan)	Besides the MPV, Mazda is considering releasing a box type minivan offering a roomy compartment. This will be different from then MPV.

Mazda's press releases on 2006.10.30/2006.12.19/2007.1.10/2007.2.20, Automotive News 2007.2.29
Notes: 1.	"Schedule/Region for Release" shows when and where each model was or will be launched first in the world.
2.	In the North American market, Mazda discontinued sales of the MPV in 2006 after launching the CX-7 and the CX-9. It will not introduce the any new MPV in the North American market.

■Mazda's technology development strategy: to introduce a new, high-performance engine family in the early 2010's

  Mazda announced its Sustainable Zoom-Zoom, a long-term vision for technology development, which will become a new midterm plan from 2007 to 2010. In the early 2010s, Mazda plans to introduce gasoline, diesel, and rotary engines, all of which will have significantly improved engine performance and gas mileage. Mazda will launch the Premacy Hydrogen RE Hybrid vehicle in 2008 under lease sales, and after proving the hybrid technology, will launch the vehicle in the early 2010s for mass-market sales.

  To develop these products, Mazda will increase development spending during the period of the new midterm plan by 30% (to 500 billion yen) when compared with the amount it spent over the four years from 2003 to 2006.

  Mazda successfully put a 2300 cc turbo engine into commercial use for the MPV and others and mounted a turbo-less 2000 cc direct injection engine on its new Premacy in January 2007. This engine achieves efficient fuel consumption at 15 km/liter in the 10-15-mode. In addition to applying this fuel efficient technology more widely, by 2009 it will release an idling stop system in the Japanese market, which when combined with a direct injection engine enables the engine to start without the use of a motor.

■Mazda's long-term vision for technology development: Sustainable Zoom-Zoom Declaration
■Plan to introduce new technologies

Timing of introduction	New technology	Overview
2009	Flex fuel	Mazda will release an engine, which is compatible with E85, in the northern European Market in 2009.
	Smart Idling Stop	Mazda will introduce the Smart Idling Stop, its proprietary system, to improve fuel economy by 10%. This is the DISI + a combustion restarting system which was exhibited in the 2005 Tokyo Motor Show.
Early 2010s	New gasoline engine	Mazda will totally revise most 4-cylinder engines in the early 2010s to improve their performance by 15 to 25%, and their gas mileage by 20% or more.
	Diesel engine	Mazda will further develop its 2000 cc diesel engines that it manufactures in-house and currently sells in Europe. The company plans to improve their gas mileage by 10%. Mazda is working to satisfy the following regulations: Euro 6 of Europe, the Tier 2 Bin5 of the U.S., and Japanese regulations that will go into effect in 2009.
	New gasoline rotary engine	Mazda will release a new gasoline rotary engine, of which performance and fuel efficiency will be significantly improved.
	AT	Mazda will develop an automatic transmission that provides the same feel and fuel efficiency as that available in manual transmissions.

■Plan to introduce future technologies

Schedule	New technologies	Outline
2008	Premacy Hydrogen RE Hybrid	Mazda will launch sales of Premacy Hydrogen RE hybrid vehicles under lease-sales arrangements. These vehicles have increased power by 40% and longer driving ranges to 200 km.
Early 2010s	Mazda's proprietary hybrid system	Mazda will launch a unique hybrid system vehicle that makes use of the hybrid technology used in the Hydrogen RE Hybrid.
Yet-to-be- announced	New Hydrogen RE	Mazda will develop a new Hydrogen RE that has the power performance equivalent to current 3000 cc V6 gasoline engines and a cruising range of 400 km.

Source: Mazda's press release on 2007.3.22

■Mazda plans to expand its domestic production capacity by 100,000 units in 2007 and to build a new plant in Thailand

  Even though Mazda's domestic production between April and December in 2006 rose by 10.9% compared to that of the previous year, to 725,000 units, the company failed to meet the rising demand seen overseas. The current Mazda 2 for Europe is produced at Ford's Plant in Spain. Mazda will begin to produce the new Mazda 2 for Europe at its domestic plants from 2007 and onward. Mazda will expand its domestic production capacity by 98,000 units in 2007 to 996,000 units total. It is increasing the production capacities of both 4-cylinder engines and automatic transmissions at the same time.

■Mazda's plan to increase domestic production capacity

	Plant	Schedule	Increase of production capacity
Complete vehicles	Hiroshima	2007	The production capacity will be increased by 31,000 units, to 515,000 units, from 484,000 units in 2006.
	Hofu	2007	The production capacity will be increased by 67,000 units, to 481,000 units, from 414,000 units in 2006.
	Total	2007	The production capacity will be increased by 98,000 units, to 996,000 units, from 898,000 units in 2006.
Engines	Hiroshima	October 2006	The production capacity of the MZR engine (1800 to 2300 cc 4-cylinder) was increased by 61,000 units to 766,000 units from 705,000 units (Note 2)
		2007	In line with the increase in production capacity at its vehicle manufacturing plants, Mazda will increase production capacity of engines too.
AT	Hofu	October 2006	The Hofu plant increased its production capacity by 109,000 units to 764,000 units, from 655,000 units.

Source: Mazda's press releases on 2006.9.14/2006.12.1/2007.3.22
Notes: 1.	The production capacity of finished vehicles is based on a standard production-hour schedule.
2.	Mazda increased the production capacity of the MZR engine from 425,000 units to 537,000 units in November 2004, to 650,000 units in May 2005, and to 705,000 units in January 2006.

■Mazda's Unit Production by Model

(units)

	2000	2001	2002	2003	2004	2005	2006
Millenia Demio Verisa	20,751 115,717	25,486 83,382	85,297	89,286	82,304 14,384	71,594 15,707	72,785 12,557
Familia Atenza Capella	252,655 71,989	292,620 38,376	260,915 116,112	154,405 174,699	11,240 142,406	5,720 141,185	139,848
Axela Roadster RX-8	47,496	38,870	40,754	86,452 30,106 60,100	316,524 24,232 50,813	364,668 29,950 27,837	380,771 48,389 23,363
Premacy MPV Tribute/Escape	60,681 107,817 3,581	45,720 88,340 32,621	48,742 105,074 23,560	30,948 75,702 26,063	24,592 67,989 19,911	83,288 50,163 13,005	121,457 33,382
CX-7 CX-9 Bongo Series	81,014	68,977	51,020	58,355	53,191	53,900	60,812 6,303 52,066
Titan Other	12,608 3,831	11,144 3,743	11,424 30,900	12,614 2,354	9,684 1,460	6,692 1,220	7,619 7,195
Total	778,140	729,279	773,798	801,084	818,730	864,929	966,547

Source: Mazda's Website

  While announcing its new mid-term plan, Mazda also announced that it will open a new passenger car manufacturing plant in Thailand under its plan to expand its production capacity overseas. The Thai business currently exports BT-50 pickup trucks, but Mazda is planning to position this new plant as a facility to export passenger cars also. The automaker is also considering increasing its North American production capacity. As a result, it will increase capital investments by 50%, compared to what it invested over the past four years. The amount will be 400 billion yen over four years under the new midterm plan.

■Status of key regional operations in 2006 and future measures to strengthen them

■Japan: its core passenger vehicles will undergo model changes; company will add dealerships around Tokyo, in areas with sparse coverage

  Mazda sold 261,000 units in FY 2006 in Japan, which is an 8.6% year-on-year decrease. Sales of mini-vehicles slightly increased to 54,000 units, while registered vehicle sales decreased by 10.9% to 207,000 units. The CX-7 has been widely accepted in urban areas since it was released in the domestic market in December 2006. According to Mazda, the CX-7 significantly improved the entire Mazda brand image. Mazda will improve its product offerings in the registered-vehicle sector under its midterm plan. It plans to make model changes to the Demio, the Atenza, and the Axela; and to launch a box type minivan, which will be different from the MPV.

  Mazda added 35 new-vehicle dealerships (30 were scheduled in the plan), and 22 used-car dealerships (20 were scheduled in the plan) during its Mazda Momentum between 2004 and 2006. Under the new midterm plan, Mazda will increase the growth of new dealerships in the Tokyo region where it has sparse coverage.

■US: Mazda introduced the CX-7 in 2006. In 2007, it will introduce the CX-9 and the new Tribute

  Mazda's sales in North America remained unchanged at around 330,000 units for the period between 2001 and 2005. But thanks to the CX-7, the Mazda 5 (Premacy), and the MX-5 (Roadster), sales grew to 350,000 units in 2006. The CX-7, the CX-9 (released in February 2007) and the Mazda 3 (with a 46.9% sales increase to 31,926 units) contributed to a 17.5% sales increases in the US between January and March 2007, amounting to 79,074 units.

  Mazda is planning the following for the US market: introducing new vehicles, reducing sales incentives, and increasing the percentage of exclusive Mazda dealerships. (The percentage was 46% at the end of Dec. 2006 but 52% at the end of March 2007). In the new midterm plan, Mazda will turn all US and Canadian distributors into wholly owned subsidiaries under the aim of creating a younger customer base, increasing the growth of next-generation dealers, and enhancing sales efficiencies.

■Europe: Mazda sold 300,000 units as a result of launching the Mazda 5 and Mazda 6 equipped with Mazda's diesel engines produced in-house and taking direct control of distributors

  Mazda's sales increased by 13.0%, to 303,600 units, in Europe during the 2006-calendar year. This is the first time sales exceeded 300,000 units since 1991. Mazda's FY 2006 sales forecast was 305,000 units. Sales by model showed the Mazda 3 increased by 1.1% to 97,772 units, the Mazda 6 by 11.3% to 89,940 units, the Mazda 5 by three times to 47,477 units, and so on across the board.

  Mazda also added the Mazda 5 and Mazda 6 to its line up. These are equipped with its new 2000 cc diesel engine it produced in-house in the latter half of 2005. In addition, Mazda took direct control of distributors in European countries. According to Mazda, these actions significantly contributed to its sales expansion in Europe.

  By directly managing distributors, 89% of sales in 15 countries was accounted for by these direct operations. Mazda set up direct distributors in Russia, Ireland, the Czech Republic and Slovakia in 2006. Mazda has also established directly owned distributors in Belgium and Luxemburg in April 2007.

  Under the new midterm plan, Mazda aims to establish dealers in key mature markets in urban regions and selectively participate in new emerging markets. Mazda plans to introduce a new diesel engine in the early 2010s that improves fuel consumption by 10% and satisfies the Euro 6, an emission gas regulation.

■China: Chongqing Plant produces Mazda 3, while Nanjing Plant to begin producing the Mazda 2 from 2007

  Mazda plans to sell 300,000 units in China in 2010 by taking advantage of its alliance with the FAW Group in China and buying into Ford's China business. (In 2001, FAW-Haima launched the Premacy and Familia and FAW Car Co., Ltd. launched the Atenza in 2003.)

  Mazda is buying into Changan Ford Mazda. This company's Nanjing vehicle manufacturing plant will begin operations in 2007, producing the Mazda 2 besides manufacturing engines. The Chongqing Plant, which had discontinued production of the Mazda 3, resumed production in October 2006.

■Mazda produces Mazda 3 at Chongqing Plant of Changan Ford Mazda; and Mazda 2 at Nanjing Plant
■Mazda resumes production of Mazda 3 in October 2006; plans to start sales activities at its second Chinese distributorship from 2008

Mazda began production of the Mazda 3 at the Chongqing Plant of Changan Ford in February 2006. Mazda took a 15% stake in Changan Ford in April 2006, changing the company name to Changan Ford Mazda Automobile Co., Ltd.

The Chinese Government disapproved of a business model in which Changan Ford Mazda produced the automobiles and FAW Mazda Motor Sales Co, Ltd. (FMSC) sold them. As a result, Mazda discontinued production of the Mazda 3 in April 2006. This discontinuation affected Mazda's plan to sell 150,000 units in 2006. As a result, sales are projected to stay at 135,000 units, nearly the same as the 2005 retail sales record, which was 130,000 units.

Manufacturing of the Mazda 6 (Atenza) is contracted out to FAW. Mazda sells the Mazda 6 through FMSC. Mazda's plan calls for selling the Mazda 3 through FMSC as well, to avoid redundant investments in distributors. FMSC has about a hundred dealers as of April 2007 and sells the Mazda 6, Mazda 3 and RX-8.

Mazda resumed production of the Mazda 3 at the Chongqing Plant in October 2006, with sales starting in January 2007. Changan Ford Mazda, the manufacturer, will have the right to set the sales price of the Mazda 3 initially, with FMSC selling the vehicles.   Mazda announced in April 2007 that in 2008 it will start its second distributorship, which will sell Mazda brand vehicles manufactured by Changan Ford Mazda. The new distributorship will begin with 50 dealers. These dealers will sell the Mazda 3 and the Mazda 2 which will be manufactured at the Nanjing Plant from 2007. For reference, Mazda plans to set up 300 dealers to support sales of 300,000 vehicles targeted for sale in 2010.

■Vehicle and engine plants will start operations in Nanjing in 2007

Changan Ford Mazda is building facilities to manufacture vehicles and engines in Nanjing. These will start operations in 2007. The vehicle plant has an annual production capacity of 160,000 units and will produce the Mazda 2 in addition to Ford vehicles. Changan Ford Mazda Engine Company, in which Mazda and Ford each hold a 25% stake and the Changan Group holds a 50% stake, will have a production capacity of 350,000 units when it launches operations. It will produce 2000 cc class engines and two types of engines Mazda developed for compact cars.

Source: Mazda's press releases on 2005.1.17/2006.4.4, Nihonkeizai Shimbun 2006.10.28/2007.4.3

■According to CSM Worldwide, production of Mazda brand vehicles will reach 1.5 million units in 2012, as the company expands operations in China and Thailand

  According to CSM Worldwide, production of Mazda brand vehicles will grow to 1.5 million units in 2012 from 1.3 million units in 2006. Domestic Japan production will slightly decrease, with Mazda keeping the production level just below 900,000 units. US production will stay in the area between 100,000 to 120,000 units.

  Chinese production will double to 240,000 units in 2012, from 110,000 units in 2006. Out of this total, Changan-Ford will expand its production volume to 120,000 units, from 4,000 units; and FAW Car to 120,000 units, from 50,000 units. FAW-Haima Motor will discontinue production in 2008. The production volume in Thailand will grow to 150,000 units in 2012 from 50,000 units in 2006. Mazda is going ahead with plans to build a new plant in Thailand.

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