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

Global deployment of production innovation system, increased production at overseas plants

2016/10/07

Summary

The new CX-9
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: Enacting the "Structural Reform Stage 2" mid-term management plan, deepening structural reforms

Mazda's 3-stage mid-term management plan

Structural Reform Plan Structural Reform Stage 2 Next mid-term management plan
FY 2012 to FY 2015 FY 2016 to FY 2018 FY 2019-
Transformation of business structure by structural reforms Qualitative growth/brand value improvement Further sustained growth
Products/development SKYACTIV <GEN1> models * Continued advancements of SKYACTIV products * Enhancements to electric drive
* Development and release of GEN2 models * Full-scale release of GEN2 models
Global production Enhancement of production in Mexico, Thailand, Russia, and Malaysia Support expansion of sales through maximization of plant capacity rate Production capacity expansion aimed at quantitative expansion

(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.



Establishing a production structure that will enable an SUV ratio of 50% on top of passenger car sales in FY 2018

  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.

 

CX-4 Changes in product portfolio
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

Spring 2016

New CX-9
(North America)
  As the pinnacle of its new-generation product group, Mazda released the new 3-row seat mid-size crossover SUV, the Mazda CX-9, in the U.S. in spring 2016. The North American market accounts for roughly 80% of Mazda's global sales volume of 50 thousand units. The CX-9 is a North American strategic model, and is manufactured at the main Ujina plant in Japan.
 The CX-9 features the highest-end engine from the SKYACTIV-G Series, the SKYACTIV-G2.5T. It was developed as the first turbo engine for the series, and produces torque similar to a naturally aspirated 4-liter V8 gasoline engine.
June 2016 CX-4
(China)
  The CX-4 is a production version of the "KOERU" concept displayed at the 2015 Tokyo Motor Show. Based on the CX-5 platform, the vehicle is a mix of SUV and coupe styling that has a low and long body with a length of 4633 mm, width of 1840 mm, and height of 1535 mm (the CX-5's dimensions are 4540 mm x 1840 mm x 1705 mm). The CX-4 is available with either a 2.0-liter engine (AT/MT) or a 2.5-liter gasoline engine (AT).
  The CX-4 is manufactured by First Automobile Works, which does consignment production for Mazda, and was first released in the Chinese market in June 2016. Production and sale of the vehicle in markets outside of China, including Japan, is currently being considered.
Second half 2016  New CX-9
(Japan)
  Sales of minivans will be discontinued in the Japanese market, and as a replacement, the new CX-9, which is currently available overseas in markets like North America, will be released (some reports claim Mazda will develop and release a new seven-seat SUV).
Early 2017 CX-5   The CX-5, which was released as the first model of the new-generation SKYACTIV product group in 2012, will see a full model change. The new model will have a completely new design and increased safety features.

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 Turn-in of a vehicle featuring GVC Turn-in of a regular vehicle
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

SKYACTIV Vehicle Dynamics   SKYACTIV Vehicle Dynamics is the generic name for Mazda's new-generation vehicle dynamics control technologies that comprehensively control individual SKYACTIVE technology units such as the engine, transmission, body, and chassis to increase the sense of connectedness between car and driver that distinguishes Mazda vehicles.
G-Vectoring Control   G-Vectoring Control is the world's first control technology that changes the engine drive torque depending on steering wheel input, enabling comprehensive control over the acceleration (G) of the horizontal and longitudinal forces that were previously controlled separately. This optimizes the contact patch load on all four wheels to realize smooth and efficient vehicle behavior.

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"



Reducing costs through structural reform, balancing limited production of diversified products, and high production efficiency

Flexible production
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

  Aiming to achieve both diversity and productivity, which have conventionally been thought to involve a trade-off, to increase product competitiveness and production efficiency at a high level.
Integrated planning/common architecture (basic framework) concept   The company projected for the next five to ten years to conduct collective product planning in a manner that encompasses all car models and classes. For example, all vehicles released between 2011 to 2015 were planned out between 2006 and 2008. One development/production concept is commonly applied to all vehicle models, thereby achieving economies of scale throughout the lineup.
  Mazda debates what products and technologies it should actually aim for among relevant staff, and has classified and defined common shapes and structures in its future models as "fixed regions," with items that need to be changed or modified designated as "variable regions."
  In fixed region mixed production of various models has created an economy of scale close that of to single-model production thanks to the effects of the common architecture, which increases production efficiency.
Flexible production   By establishing "multiproduct variable production (note 3)," efficient product variation was achieved for the variable region.
Source: Mazda private investors briefing (July 2015)
(Note) 1.  Monotsukuri Innovation has been advanced through cooperation between the development department and production department, but in the future, the procurement department will also become involved.
2.  Toyota announced its TNGA plan would "finalize the medium- to long-term product lineup," and that the OEM would "simultaneously develop multiple vehicles through grouped development" (press release from March 27th 2013), hinting at a similar concept.
3.  "Multiproduct variable production" refers to the mixed production system that is highly flexible against changes in models that are produced and their quantity. For example:
3-1.   Along with determining a unified production process with common (optimal) criterion, product structures and standards across model types are unified during product development. Thanks to those procedures, redundancies such as specialized equipment and facilities found in conventional mixed production are completely eliminated.
3-2.   Equipment that makes up production lines was made to not be exclusive to particular models, but instead was thoroughly generalized so that the range of the mix would be as broad as possible.


Full operation of overseas production facilities: implementation of swing production

  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)

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Plan
Domestic 867 847 879 973 919 989 980
Overseas 411 338 321 296 456 582 -

Overseas

production ratio

32.2% 28.5% 26.8% 23.3% 33.2% 37.0% -
Total 1,278 1,185 1,200 1,269 1,375 1,571 -
Export 719 654 703 791 738 787 -

Export/domestic

production

82.9% 77.2% 80.0% 81.3% 80.3% 79.6% -

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

Japan Hofu * Partial production of the CX-3, which was produced at the Ujina plant, will be transferred to the Hofu plant in the second half of FY 2016.
Ujina * Expansion of production capacity of the CX-5 and CX-9.
* In FY 2016, production units have decreased due to preparations for new model production, but the operating rate will improve from FY 2017.
Overseas Mexico * Mexico plant to fully come on stream and engage in swing production (mutual complement) of the Mazda3 with the Hofu plant. (Note)
Others * Increased production capacity in Thailand (CX-3) and Malaysia (CX-5).

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 performance: Small growth in sales in FY 2016, 3.7% decrease in sales figures, operating profit expected to decrease by 25%

  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)

FY2011 FY2012 FY2013 FY2014 FY2015

FY2016

Plan

Apr.-Jun. 2015 Apr.-Jun. 2016
Japan 206 216 244 225 232 233 57 39
North America 372 372 391 425 438 449 116 113
Europe 183 172 207 229 257 260 54 66
China 223 175 196 215 235 238 57 59
Others 263 300 293 303 372 370 86 98
Worldwide 1,247 1,235 1,331 1,397 1,534 1,550 370 375

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)

FY2011 FY2012 FY2013 FY2014 FY2015

FY2016

Plan

Apr.-Jun. 2015 Apr.-Jun. 2016
Sales Domestic 560,200 588,000 655,700 617,400 660,900 660,000 165,500 120,500
Overseas 1,472,900 1,617,300 2,036,500 2,416,500 2,745,700 2,620,000 640,500 655,700
Total 2,033,058 2,205,270 2,692,238 3,033,899 3,406,603 3,280,000 806,007 776,204
Operating profit (38,718) 53,936 182,121 202,888 226,775 170,000 53,324 52,439
Operating profit margin -1.9% 2.4% 6.8% 6.7% 6.7% 5.2% 6.6% 6.8%
Ordinary profit (55,262) 39,101 140,651 212,566 223,563 176,000 54,617 44,928
Net income (107,733) 34,304 135,699 158,808 134,419 115,000 36,800 21,230
Capital expenditures 78,000 77,200 133,200 131,000 89,200 105,000 16,700 13,300
Depreciation 68,800 60,000 57,700 68,900 79,000 83,000 19,200 19,500
R&D costs 91,700 89,900 99,400 108,400 116,600 125,000 27,000 28,900

Exchange

rates

JPY/US$ 79 83 100 110 120 110 121 108
JPY/EUR 109 107 134 139 133 125 134 122
Source: Mazda's financial results
(Note) 1.  The decrease in net income in FY 2015 is due to recording a 40.7 billion yen for quality-related costs for Takata-made airbags as an extraordinary loss.
2.  Mazda's outlook for FY 2016 exchange rates marks a slightly weaker yen considering the exchange rate as of mid-September (USD 1 = approximately JPY 102, EUR 1 = approximately JPY 115), but Mazda has not made adjustments in its first quarter earnings announcement. The OEM will assess future exchange rate fluctuations to make adjustments if necessary.


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

(LMC Automotive, August 2016)

Mazda's production forecast

  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)

2013 2014 2015 2016 2017 2018 2019
Japan 1,014,274 990,234 974,778 986,017 1,036,240 1,003,168 1,006,381
China 187,262 205,511 233,080 256,964 235,866 268,191 288,409
Mexico 0 99,033 182,357 166,470 175,941 177,099 185,719
Thailand 95,109 69,205 121,130 130,623 121,701 123,489 142,737
Iran 11,566 4,211 3,058 14,286 21,317 22,344 24,676
Russia 26,617 30,846 23,214 20,624 11,715 16,973 20,595
Vietnam 3,768 8,380 16,830 22,191 15,744 14,519 16,007
Malaysia 5,114 10,488 10,797 12,207 12,572 13,209 15,167
Taiwan 9,730 9,334 3,452 4,496 8,706 8,567 8,610
Ecuador 7,474 5,990 3,784 1,534 3,422 3,868 4,171
South Africa 3,124 2,864 1,337 785 1,380 1,641 2,262
Colombia 7,291 4,319 0 0 0 0 0
Indonesia 733 749 682 310 114 0 0
Total 1,372,062 1,441,164 1,574,499 1,616,507 1,644,718 1,653,068 1,714,734
Source: LMC Automotive "Global Automotive Production Forecast" (August 2016)
(Note)1.  Data indicates figures of only small-size vehicle, including passenger cars and light commercial vehicles with gross vehicle weight of under 6 ton.
2.  All rights reserved. Reproduction of any data will require permission of LMC Automotive.
3.  For more information or inquiries of forecast data, please contact LMC Automotive.

 

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Keyword:
Integrated planning, common architecture, Monotsukuri Innovation

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