Mazda: Continuing to release SUV models, increasing its ratio of SUVs to a maximum of 50% in FY 2018

The new CX-9, which was released in North America (Photo: Mazda)

  Mazda is currently carrying out its "Structural Reform Stage 2" mid-term management plan for the period FY 2016 to FY 2018. In its previous "Structural Reform" mid-term management plan that was in force from FY 2012 to FY 2015, the OEM released six models from its new-generation product group featuring SKYACTIV technology, and strengthened its production systems in Mexico, Thailand, Russia, and Malaysia to make significant advances in transforming its business structure.

  Under its "Structural Reform Stage 2" mid-term management plan, Mazda will continue to release SKYACTIV models such as the CX-9 and CX-4 from the first half of FY 2016, and for the latter half of the plan the carmaker is planning to develop and release SKYACTIV GEN2 models.

  For its sales and production plans, Mazda will increase production of SUVs, which are selling well globally, and aims to expand its global sales volume from 1.53 million in FY 2015 to 1.65 million in FY 2018. Additionally, in FY 2018 it will establish a flexible production structure allowing for an SUV ratio of 50% (the ratio of SUVs in FY 2015 was roughly 34%).

  Mazda will increase flexibility at domestic and overseas plants, while implementing swing production, where domestic and overseas plants mutually complement each other, in order to make full use of its overseas production facilities. The OEM plans to achieve production of 1.65 million vehicles in FY 2018 without constructing new plants (the plan also acts as a countermeasure for the strength of the yen since the beginning of 2016).

  SKYACTIV models are being developed with a consolidated design and common architecture. As a result, Mazda is able efficiently to carry out small lot production of many products.

  In its next mid-term management plan that will begin in FY 2019, the automaker will carry out a full scale release of SKYACTIV GEN2  models, enhance its electric drive technology, and increase its production capacity for quantitative expansion.

Related Reports:
Mazda introduces SKYACTIV Gen2 models as part of next mid-term plan (Jul. 2015)
JSAE Exposition 2016 (Part 2): Mazda's G-Vectoring Control technology (Jun. 2016)

Mazda's 3-stage mid-term management plan

(Note) In the last fiscal year of "Structural Reform Stage 2" (FY 2018), Mazda aims to sell 1.65 million vehicles globally and achieve an operating ROS of 7% or more.

  In the spring of FY 2016 the new CX-9 was released in the North American market, and in June, the all new CX-4 was released in China.

  There are now eight SKYACTIV models, of which four were SUVs, and three  newly introduced models (CX-5, CX-3, CX-4). As seen in the graph on the bottom right, the increase in sales from FY 2012 to FY 2015 is thanks to these newly released SUV models. Mazda plans to maintain sales for the Demio, Axela, and Atenza, while further increasing sales of its CX line crossover vehicles. In FY 2018, the OEM plans to establish a production structure that can raise the ratio of CX line vehicles to 50%.

  However, its MPV, Premacy, and Biante minivans have performed poorly, and these vehicles will be discontinued by 2017 (production of the MPV ended in March 2016). The CX-9 is scheduled for release in the Japanese market in the second half of 2016 as a replacement.

The CX-4, released in China (photographed at the Beijing Motor Show 2016)	Changes in product portfolio (global sales volume): maintain sales of passenger cars while adding models from the CX line (global sales volume in FY 2015: the CX-5 sold 369 thousand units, the CX-3 117 thousand, and the CX-9 31 thousand. For passenger vehicles, the Axela (Mazda3) sold the most at 457 thousand units.) (Source: Mazda)

SUV models Mazda will release after 2016

Source: Mazda's press releases, Nihon Keizai News Paper dated Feb. 2/Jun. 21, 2016

Release of the G-Vectoring equipped Axela and Atenza

  Mazda launched the fully redesigned Mazda Axela (released in the Japanese market in July 2016) and redesigned Atenza (released in August) equipped with G-Vectoring Control (GVC), which is the first of the SKYACTIV Vehicle Dynamics technologies. All new-generation products will have GVC implemented sequentially.

The fully redesigned Axela, which is equipped with G-Vectoring	Turn-in of a vehicle featuring GVC	Turn-in of a regular vehicle
	Operation image of G-Vectoring Control (Gy is lateral acceleration, Fy is cornering force)

(Note) "Turn-in" is the process of changing from linear motion to turning.

G-Vectoring Control developed as the first of the SKYACTIV Vehicle Dynamics technologies

Source: Mazda's press release dated Jul. 14, 2016

  For details on GVC, see "JSAE Exposition 2016 (Part 2): Mazda's G-Vectoring Control technology"

Flexible production of products planned with a common architecture concept achieves both limited production of diversified products and high production efficiency. (Source: Mazda)

  The pillars of the Structural Reform that Mazda began in FY 2012 are "business revolutions through SKYACTIV" and "advancing cost improvements through Monotsukuri Innovation (production innovation system)."

  With Monotsukuri Innovation, Mazda has made forecasts for the next five to ten years and developed all models with a common architecture (Mazda refers to this as integrated planning), sharing optimized structures of functions laterally spread across models/vehicle classes, and pursuing economies of scale for Mazda's entire lineup. As a result, the carmaker has been able to realize high production efficiency even with limited production of diversified products. Through Monotsukuri Innovation, Mazda was able to reduce nearly 30% of its target costs and has established a structure where it is able to generate profit even in conditions with an exchange rate of 80 yen to the dollar.

  In the future, Mazda will deploy Monotsukuri Innovation, which has generated great results in domestic facilities, to overseas production facilities and its supply chain.

Monotsukuri Innovation

  In FY 2015, Mazda manufactured 1.57 million vehicles. 989 thousand were produced in Japan, and 582 thousand were produced overseas to increase the ratio of overseas production to 37.0%. Mazda will continue to maintain production of 850 thousand or more vehicles domestically, but future growth will be handled at overseas production facilities. The OEM aims to have an overseas production ratio of 40% or more.

  Mazda aims to meet its global sales target for FY 2018 of 1.65 million vehicles without constructing a new plant. A prerequisite for the utilization of its overseas production facilities is the implementation of a swing production system, wherein plants mutually complement each other. First, partial production of the Mazda3 at the Hofu plant will be transferred to Mexico, where the Mexico plant will be running at full steam as a swing production system is established between both plants.

  A flexible production system will be implemented at overseas plants as well, enabling swift response to changes in demand between passenger cars and SUVs.

Mazda's domestic/overseas production

(1,000 units)

Source: Mazda's financial results
(Note) Mazda's production is concentrated in Japan, China, Thailand, and Mexico. The production capacity of major countries in 2015 was 996 thousand vehicles in Japan, 220 thousand vehicles in China, 250 thousand vehicles in Mexico, and 141 thousand vehicles in Thailand. Additionally, Mazda manufactures vehicles in nine other countries including Russia, Colombia, and Taiwan (among which total vehicle production is less than 100 thousand vehicles).

Initiatives for maximizing production efficiency

Source: Mazda's financial results for FY2015

(Note) Mazda will not do a North American release for the new Demio (Mazda2), which had its Japanese market release in September 2014. Sales of the Mazda2 in the U.S. and Canada ended in 2015. Consequently, production of the Mazda3 at the Mexico plant has been increased to roughly 60%, with remaining capacity being allocated to production of the Mazda2 for regions other than North America, as well as OEM vehicles based on the Mazda2 supplied to Toyota.

  Mazda's global sales volume has increased by 23.0% from the 1.247 million vehicles in FY 2011 (prior to the Structural Reform Plan) to 1.534 million vehicles for a record high in FY 2015, and is expected to grow slightly in FY 2016 to 1.55 million vehicles. In contrast with FY 2015's year-over-year (y/y) growth of 137 thousand vehicles, the reason the company's plans to maintain sales increases at a level of 160 thousand vehicles for FY 2016 can be attributed to the expansion of production capacity of SUV-type vehicles not keeping up with the increase in demand, and current preparations for producing new models scheduled to be released in the current term preventing the equipment operation rate from climbing.

  Sales figures have increased from over JPY 2 trillion in FY 2011 to JPY 3.4 trillion in FY 2015, with operating income also increasing from a deficit of JPY 38.7 billion in FY 2011 to JPY 226.8 billion in FY 2015.

  In its plan for FY 2016, which was premised on exchange rates of USD 1:JPY 110, and EUR 1:JPY 125, the OEM expects operating income to decrease by JPY 81 billion due to the impact of currency fluctuations, and has planned for sales figures of JPY 3.28 trillion (3.7% decrease), and an operating income of JPY 170 billion (25% decrease). Mazda will increase its vehicle numbers and profitability through the release of new products and improved models, and strengthen initiatives for purposes such as cost improvements and suppressing fixed costs. The carmaker will make full use of its overseas plants to minimize the impact of exchange rate fluctuations, and aims to achieve vehicle sales of 1.65 million in FY 2018 without constructing a new plant.

Mazda's global sales

(1,000 units)

Source: Mazda's financial results for FY2015
(Note) The decrease in domestic sales from April to June 2016 is due to the decrease in the new model effect for the both the Demio and CX-3, which was released in the previous fiscal year. Mazda plans to regain lost ground through the release of the Axela in July and the Atenza in August, both of which are equipped with G-Vectoring technology.

Mazda's Consolidated Results

(in millions of JPY)

(LMC Automotive, August 2016)

  According to LMC Automotive's production forecast (August 2016), Mazda's light vehicle production will be 1.62 million units in 2016, up by 2.7% from 2015, 1.64 million units in 2017, up by 4.5% from 2015. The production volume in 2019 will be 1.71 million units, up by 8.9% from 2015.
  LMC Automotive forecasts that Mazda will focus on its CX-Series SUVs to meet the rising global demand for this bodystyle. This will come at the expense of its MAV (Multi activity vehicle) portfolio, with the Premacy and Biante due to end production in 2017.
Given's Mazda's decision to concentrate on meeting the increasing demand for SUVs, the research company expects production in this booming segment to rise from 33.9% of Mazda's total output in 2015 to 37.6% in 2020.
However, LMC Automotive expects to see overall production volume be nearly flat in 2018 as Mazda's bestselling models start to age and the fact the next-generation SKYACTIV models will not be launched until 2018-2019. The Mazda3 and CX-5 should hit the market towards the end of 2018, while the Mazda2 is due out in early 2019.

Corporate Highlights

  In order to support global growth, Mazda plans to start production of the CX-3 at its Hofu plant in Japan around the second half of 2017. The group started production of an all-new Fullsize SUV, the CX-9, at its Ujina plant in Hiroshima, Japan in February 2016, to maximize production efficiency, with the bulk of the output due to be exported to the North American market.

Chinese Highlights

  The economic slowdown in China had led to LMC Automotive's earlier downward forecast, but the research company now expects Mazda to perform well in the Chinese market in 2016, driven by the all-new CX-4, production of which began in second quarter of 2016 and solid ongoing growth of the Mazda3 Axela.

North American Highlights

  In 2015, Mazda decided to discontinue the Mazda5 and drop the Mazda2 from the US and Canadian markets. Production for Mazda in Mexican Plant is expected to fall by 8.1% in 2016, with the Mazda2 decreasing by 5.2% and the Mazda3 by 9.0%.

Mazda's Light vehicle production in 2019 will be 1.71 million units (LMC Automotive)

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Keyword：
Integrated planning, common architecture, Monotsukuri Innovation

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