Mazda: Investing JPY250 billion over the next 4 years, aims for 2 million units production

Targeting strong growth from fiscal year 2021 with new plant operations in US

2018/07/23

Summary

CX-8
CX-8 to be introduced in China and Australia(Beijing Motor Show 2018)

  In April 2018, Mazda announced its “Direction of Future Framework”. It outlines the direction the company must take to achieve further significant quantitative and qualitative growth based on the results of the mid-term “Structural Reform Plan” for the fiscal years 2012~2015 and the “Structural Reform Stage 2” for the fiscal years 2016~2018. In the SKYACTIV (second generation) products and technologies to be rolled out from 2019, the “Bundled planning” approach that was commonly applied to all models until now will be replaced by product planning based on product lineups divided into “Small Products” and “Large Products” architectures. For the Large Products, a wider array of powertrain products including electrification is planned, aiming to improve the retail price per vehicle.

  In the U.S., the new Alabama plant jointly built with Toyota will become operational in the fiscal year 2021. In addition to its annual capital investment amount of JPY 100 billion, Mazda plans to invest an additional JPY 250 billion over 4 years from fiscal year 2018. Furthermore, it will invest a total of JPY 40 billion over 4 years to accelerate reforms to its sales network in the U.S. With these actions, fiscal years 2018~2020 will be a period for gaining a “solid foundation” towards sustainable growth. And, although investment funding will increase, Mazda expects to see strong growth in both sales and profitability from fiscal year2021 when the new U.S. plant starts operations.

  In fiscal year 2021 Mazda aims to sell 1.8 million units, and 2 million units globally in fiscal year 2023 when full production capacity at the new Alabama plant is achieved.

 

Related report:
JSAE Exposition 2018: Exhibits of 6 automakers(June 2018)
Mazda's next-generation SKYACTIV-X gasoline engine technology(December 2017)

 



Mazda: Aims for 2 million units global sales in fiscal year 2023

  Mazda implemented the mid-term plan for fiscal years 2012~2015, known as the “Structural Reform Plan”, and the “Structural Reform Stage 2” for fiscal years 2016~2018. During this period, the SKYACTIV (first generation) models were continuously sold in the market reaching a yearly sales increase of about 50,000 units. The global sales plan for fiscal year 2018 is 1.66 million units.

  With one year remaining in the “Structural Reform Stage 2” Mazda announced in April 2018 its “Direction of Future Framework”. Below is the outline of the schedule.

1)Fiscal year 2018~2020: This is the period of building a “solid foundation” for sustainable growth by active investment, mainly in the U.S. plant where operations at the joint venture assembly plant in the U.S. will start from fiscal year 2021. Furthermore, second generation SKYACTIV products and technologies will be introduced within this period. Reforms to its sales network in the U.S. will also continue.

2)Fiscal year 2021~2023: The aim is to sell 1.8 million units in fiscal year 2021 by full utilization of the existing production capacity. From fiscal year 2021, Mazda expects to reach the sustainable growth period both in terms of sales and profitability, achieving an annual sales volume of 2 million units by fiscal year 2023.

 



Introduction of second generation SKYACTIV products, including mild hybrids

  Mazda will start to introduce SKYACTIV (second generation) products from the January~March quarter of 2019. In the first generation of SKYACTIV products, all models were introduced using the “Bundled Planning” approach centered on the Mazda 3(Axela), but Mazda intends to split the product lineups of the second generation into Small products (CX-3 and the New CX reported to be an SUV to be manufactured at the new U.S. plant) and Large products (Mazda 6(Atenza)/CX-5/CX-8/CX-9). When Mazda reaches its global sales target of 2 million units, Mazda expects that volume to consist of 1.2 million units of Small products and 800,000 units of Large products.

  The Large products architecture was separated from that of the Small products to develop higher value-added products. Mazda is currently considering the adoption of rear-wheel drive systems. Furthermore, through the licensing of technology from Toyota, MaBundled Planningzda plans to advance the electrification of its powertrains and raise the units selling price of its vehicles. With regards to electrification, Mazda plans to introduce mild hybrids and EVs in 2019 and PHVs in 2021.

  Regarding internal combustion engines, the automaker will roll out the next generation SKYACTIV X engines equipped with its SPCCI (Spark Controlled Compression Ignition) technology. Mazda plans to combine electrification technologies with the SKYACTIV X engine, likely with its first mild hybrid system and SKYACTIV X engine on the new Mazda 3 scheduled to go on sale in January~March 2019.

  Mazda and Toyota’s direction is to standardize a factory installed system to control the coordination between smart phones and the vehicle’s audio, video, and navigation systems, with plans to adopt the next generation MAZDA CONNECT car connectivity system on the new Mazda 3.

 Mazda will continue to develop diesel engines, but aims to develop diesel engines that do not rely upon after-treatment devices as much as possible. The CX-8 model launched domestically in December 2017 was equipped only with the diesel engine option.

 

Mazda adopts its Co-Pilot autonomous driving technology

  Moreover, Mazda will further develop its i-ACTIVESENSE advanced safety features, with the proof-of-concept demonstrations for the Co-Pilot suite of autonomous driving technologies starting in 2020, with plans to introduce the technologies as standard equipment on production models by 2025. Co-Pilot means a “copilot or backup pilot of an aircraft”, indicating that the technologies operate in the background during normal operation where the driver has full responsibility for the control of the vehicle, constantly monitoring the driver’s state to virtually drive the vehicle. The concept is when the Co-Pilot system detects a driver unable to operate the vehicle in a normal manner, the system intervenes to take control of the vehicle to steer the vehicle to a safe location and bring the vehicle to a stop. Mazda is aiming to develop autonomous driving technologies that allow “driving pleasure at all times with cars that provide safety and peace of mind”.

  Mazda’s safety design concept in particular considers the elderly driver population, and is in line with the aims of the base design specifications established by the MLIT (Ministry of Land, Infrastructure, Transport and Tourism) for “emergency driver abnormality response systems (evacuation to road shoulder)” that was announced in March 2018.

  Incidentally, the new Lexus LS launched in October 2017 is already equipped with the Driver Emergency Stop Assist system (coordinated with Lane Tracing Assist, LTA) as an emergency driver abnormality response system. When the LTA is activated, detecting that the driver’s hands are off the steering wheel, the system will prompt the driver by means of audio and visual alerts and by decelerating the vehicle. The system then alerts those outside the vehicle by activating the hazard lamps and horn to help prevent or reduce damages to the vehicle or to others,while slowing and eventually stopping the vehicle within its lane. After stoppings the vehicle, the system unlocks doors and activates an automatic HELPNET connection for a rescue request, contributing early driver rescue.

Introduction of SKYACTIV (second generation) product lineup Product development dividing next generation products into Small and Large product architectures

Source: Mazda Financial results

 



Mazda invests an additional JPY 250 billion over 4 years including the new U.S. plant, aiming for stronger growth from 2021

  Mazda is planning to actively increase its investments with the aim of establishing a framework for sales of 2 million units. The increased amount will be incremental to its normal annual capital investment of JPY 100 billion, with Mazda planning to add a total of JPY 250 billion in investment that includes a new U.S. plant from 2018 over 4 years. Mazda’s annual capital investment was JPY 94.4 billion in fiscal year 2016, JPY 104.1 billion in fiscal year 2017 and will be JPY145.0 billion in fiscal year 2018.

  Until its U.S. plant becomes operational, Mazda aims to sell 1.8 million units by fiscal year 2021 using its current production footprint at full capacity.

  Mazda will maximize production efficiency by closely coordinating swing production among its manufacturing sites to build a solid business and financial base for sustainable growth.

  The plan is to roll out the second generation SKYACTIV products and start full-scale growth from fiscal year 2021 when the new U.S. plant goes into operation, which is expected to increase operating profit to more than 5%. Furthermore, sales volumes and revenues are expected to grow, with plans to limit development costs to about 4% of sales revenues.

Additional investment of JPY 250 billion over the next 4 years Aiming for strong profit growth beyond fiscal year 2021
Additional investment of JPY 250 billion over the next 4 years Aiming for strong profit growth beyond fiscal year 2021

Source: Mazda Financial Results

 



Strengthening U.S. market position: Production starts at the new Alabama assembly plant from 2021

 In August 2017, Mazda and Toyota signed an agreement to enter a business and capital alliance. The alliance will jointly develop technologies for electric vehicles as well as invest USD 1.6 billion to build a joint venture assembly plant in Alabama with an annual capacity of 300,000 units. The new assembly plant will start operations in 2021, out of the 300,000 units production capacity, 150,000 units will account for production of the crossover model that Mazda plans to introduce to the North American market.

 In 2012, Mazda discontinued production at the Flat Rock assembly plant, a joint venture plant with Ford. Currently Mazda does not have production sites in the U.S. However, Mazda believes that producing vehicles in the U.S. will contribute significantly to the improvement of Mazda’s brand image.

 In June 2018, Mr. Akira Marumoto, who ran the Americas operations since 2013, was named as the new CEO, said that "In terms of profit and brand, the U.S. is the highest priority.

 

Reformation of U.S. sales network: Challenge to sell 400,000 units per year

 From 2016, Mazda has been working to reorganize its U.S. sales network. From fiscal year 2018, it plans to invest JPY 10 billion annually for a total of JPY 40 billion over the next 4 years to expand its next-generation branded dealerships from the current 40 dealers to 300 dealerships in 35 priority markets. By working with dealerships that are executing sales activities with a solid understanding of Mazda’s brand strategy, Mazda expects to increase dealership profitability without having to rely upon incentives and discounts.

 Mazda will renovate the interiors of the next-generation branded dealerships from the current orange and green color tones to black and woodgrain tones to create a more luxurious image. Each dealership in the 35 priority markets will have an average annual sales target of 1,000 units and a vehicle repurchase rate of 55%. Among Mazda’s existing 600 dealerships, the top 25% are already as profitable as Toyota and Honda dealerships (Automotive News 2018.3.19).

 In preparation for the start of operations of the new U.S. assembly plant in 2021, Mazda is aiming to establish a network that is capable of expanding annual sales volume of 304,000 units in 2017 to 400,000 units.


 Mazda has continued to strive to enhance the premium and luxurious feel of the Mazda brand. Since the start of its “Structural Reform Plan” in 2012, Mazda has introduced new generation products based on its “KODO (Soul of Motion)” design philosophy and SKYACTIV vehicle architecture, which have further enhanced its brand value. It has shed its discount brand image, while the average income of customer base has risen. The CX-9 launched in 2016 is representative of Mazda’s new luxurious styling, with a growing number of customers comparing Mazda model to that of luxury brand models such as Lexus, BMW, and Mercedes-Benz.


 It should be noted that Mazda lost share in the U.S. market due to the decrease in passenger car sales in fiscal years 2016~2017. However, Mazda has  recovered a portion of that lost market share in January-May period of 2018 as a result of increased supply capacity of SUVs, primarily of the CX-5, which went into production at the Hofu Plant in October 2017 as well as the Ujina Plant (Hiroshima City). For the production of next-generation products, Mazda is building a flexible manufacturing system in which all of its plants will be capable of assembling both SUVs and sedans.

 

Mazda's sales in US by nameplate

2014 2015 2016 2017 Jan.-May
2017
Jan.-May
2018
Mazda 2 13,615 297 2 0 0 0
Mazda 3 104,985 107,885 95,567 75,018 33,361 30,363
Mazda 6 53,224 57,897 45,520 33,402 15,649 14,878
MX-5 Miata 4,745 8,591 9,465 11,294 5,927 3,858
Car total 176,569 174,670 150,554 119,714 54,937 49,099
CX-3 0 6,406 18,558 16,355 6,398 7,295
CX-5 99,122 111,450 112,235 127,563 47,527 68,302
CX-9 18,497 18,048 16,051 25,828 10,414 12,335
Mazda 5 11,613 8,609 375 10 6 0
Light truck total 129,232 144,513 147,219 169,756 64,345 87,932
Mazda Total 305,801 319,183 297,773 289,470 119,282 137,031
Market Share 1.9% 1.8% 1.7% 1.7% 1.7% 1.9%

Source: Automotive News

 



New models to be introduced from 2018 to early 2019

 Below are the new Mazda models to be launched from 2018 to early 2019.

  • New Mazda 3 (Axela):The next version is scheduled to launch in January~March 2019 and will be the first model to be equipped with the next generation SKYACTIV X gasoline engine and the next generation SKYACTIV-VEHICLE ARCHITECTURE technology. This model is also expected to be the first equipped with the new MAZDA CONNECT based on the vehicle system shared with Toyota.
  • CX-8:The so-called “three-row crossover SUV”, the CX-8, was first launched in Japan in December 2017. It was exhibited at the Beijing Motor Show held in late-April to-early-May 2018.  In the second-half of 2018, the model will be launched in China by Changan Mazda. The CX-8 is also scheduled to be launched by the end of 2018 in Australia and New Zealand.
  • The updated Mazda 6 (Atenza):Based on the idea of developing a car that offers intrinsic value that is built into the  basic sedan model, the updated Mazda 6 was launched in Japan in June 2018. This reflects Mazda’s development philosophy that, while although sedans are being displaced in the market by the popularity of SUVs, it will continue to strengthen the development of its technologies  based on sedans.
    Mazda also completed the world’s first application of a new proprietary material for interiors, “Ultrasuede nu”, that was jointly developed with Toray fusing state-of-the-art technologies and traditional Japanese craftsmanship. Moreover, by introducing some of the technologies of the SKYACTIVE-VEHICLE ARCHITECTURE, the structure of the seats and suspensions was refreshed, and body rigidity was increased by applying efficient reinforcement to improve the bonding of annular structures. The next generation Mazda 6 scheduled for launch in 2020 will be one of the core models of the Large Products lineup.
  • The updated CX-3:In May 2018, the updated model was launched in Japan. The displacement of the diesel engine was increased from 1.5L to 1.8L. With the 2.0L gasoline engine, improvements in practical fuel economy were achieved. The redesigned model adopts some of Mazda’s next generation SKYACTIVE-VEHICLE ARCHITECTURE technologies.
  • The New CX-5:Mazda’s first model to adopt its cylinder deactivation technology for the 2.5L gasoline engine. In the 2.2L diesel engine, the “rapid multi-stage combustion” feature was adopted that improves fuel economy and drive performance. The model was launched in Japan in February 2018.
CX-8 Atenza
The CX-8 launching in China and Australia (Beijing Motor Show 2018) The updated Mazda 6 (Japan spec) (Source: Mazda)


Mazda profitability: Securing a solid foundation in fiscal year 2018~2020, getting ready for stronger growth

 Mazda’s revenue in fiscal year 2017 was up 8.1% y/y, and operating income grew by 16.5%, but due to the sluggish sales of passenger cars in the U.S. market, operating  margin was 4.2%, making Mazda the least profitable among the 9 Japanese listed carmakers. In fiscal year 2018, Mazda is anticipating a 3.0% operating margin due to a strong yen (forecasting JPY 107 per USD) and aggressive investment, starting with the new plant in the U.S. Even in the “Direction of Future Framework” , the 3 years from 2018 are expected to be a period of expanding investment to secure a “solid foundation” in the market.

  With the start of the new plant in the U.S. in fiscal year 2021, Mazda is aiming to achieve solid growth from both a quantitative and qualitative perspective.

 

Mazda's Consolidated Results

(in millions of JPY)

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018
Plan
Sales revenues 2,205,270 2,692,238 3,033,899 3,406,603 3,214,363 3,474,024 3,550,000
Operating income 53,936 182,121 202,888 226,775 125,687 146,421 105,000
Operating margin 2.4% 6.8% 6.7% 6.7% 3.9% 4.2% 3.0%
Current income 33,087 140,651 212,566 223,563 139,512 172,133 130,000
Net income 34,304 135,699 158,808 134,419 93,780 112,057 80,000

Source: Mazda's Financial results


  Mazda’s global sales continue to expand at a pace of more than 50,000 units per year since fiscal year 2012 and the annual total is expected to reach 1.66 million units in fiscal year 2018. The company will maintain a stable growth of around 50,000 units per year by full utilization of its current production capacity, aiming to sell 1.8 million units in 2021 and 2.0 million units in fiscal year 2023 once the full capacity of the new U.S. plant is brought on line.

 

Mazda's sales by region

(in thousands of units)

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018
Plan
FY2021
Plan
FY2023
Plan
Japan 216 244 225 232 203 210 215
North America 372 391 425 438 429 435 457
Europe 172 207 229 257 262 269 265
China 175 196 215 235 292 322 322
Other 300 293 303 372 373 394 403
Worldwide 1,235 1,331 1,397 1,534 1,559 1,630 1,662 1,800 2,000

Source: Mazda Financial Results

 



Sales Forecast by LMC Automotive: Mazda’s light vehicle sales in 2021 will be 1.59 million units

LMCA

 According to LMC Automotive’s sales forecast (Quarter 2 2018), Mazda’s light vehicle sales in 2018 will be 1.64 million units, up 4.5% from 2017, thanks to favorable sales in the USA and Japan. Annual sales between 2019 and 2021, however, will be below 1.6 million units and Mazda’s sales in 2021 will be 1.59 million units.

 LMC Automotive comments as follows; “In Asia‐Pacific, Mazda’s largest global market, Mazda’s sales volume is expected to increase by 4.4% this year, driven by the robust ongoing momentum of the CX‐8, following its launch in December last year in Japan. Mazda now sells more vehicles in China than in its home market of Japan, and we expect China to remain the group’s largest global market in the longer term.

Regional growth will be underpinned by the automaker’s SUV products, with the segment projected to increase its share of Mazda’s overall vehicle portfolio to more than 40% this year.”

  As for the USA, Mazda’s largest market by country, LMC Automotive comments; “Mazda has consistently lost market share since it peaked at 2% in 2008 and 2009, but is likely to recover some of its luster this year thanks mainly to the Compact CX‐5 and Midsize CX‐9 SUVs. The CX‐5 has become by far the brand’s best‐seller and the only one to enjoy sales of more than 100k units. The overall lower volume does not seem to bother Mazda, as it tries to reposition itself as a luxury brand. It says, for example, that half of the CX‐9 buyers cross‐shopped the SUV with Premium Light Vehicles. Nevertheless, Mazda will come with an exclusive SUV for North America, which we forecast to arrive in 2021 to become the brand’s best‐seller in the following year. The CX‐7 would then be the only model to sell more than 100k units, but would definitely raise Mazda total sales.”

 

Mazda's light vehicle sales in 2021 will be 1.59 million units

COUNTRY GLOBAL MAKE 2015 2016 2017 2018 2019 2020 2021
Mazda Motors Mazda 1,503,665 1,535,595 1,568,776 1,639,574 1,592,425 1,542,285 1,563,828
Isuzu 0 0 0 0 0 16,069 28,560
Total  1,503,665 1,535,595 1,568,776 1,639,574 1,592,425 1,558,354 1,592,388
USA Mazda 319,184 297,773 289,470 326,464 319,900 313,925 336,284
China Mazda 235,384 282,871 316,629 296,316 288,526 286,541 282,383
Japan Mazda 245,457 201,431 209,711 251,780 241,810 230,610 218,502
Australia Mazda 114,024 118,217 116,349 113,810 108,353 110,903 110,198
Canada Mazda 71,709 69,209 74,056 74,481 70,501 69,120 65,783
Thailand Mazda 39,451 42,537 51,355 54,287 45,784 37,673 48,511
Isuzu 0 0 0 0 0 13,424 17,089
Thailand sub-total 39,451 42,537 51,355 54,287 45,784 51,097 65,600
Germany Mazda 58,218 63,586 67,385 63,472 61,973 54,526 57,235
Mexico Mazda 57,393 54,855 54,163 50,575 46,574 45,749 47,672
Vietnam Mazda 20,359 32,108 26,009 36,989 36,965 37,896 34,498
Isuzu 0 0 0 0 0 2,514 10,055
Vietnam sub-total 20,359 32,108 26,009 36,989 36,965 40,410 44,553
UK Mazda 45,504 46,609 39,092 36,124 32,812 29,918 32,087
Russia Mazda 27,358 21,543 25,910 30,851 33,513 29,465 26,145
Colombia Mazda 15,768 17,770 18,993 21,024 21,655 22,551 23,426
Taiwan Mazda 10,463 22,898 22,415 19,505 19,257 19,508 20,119
Chile Mazda 11,624 13,060 15,411 17,742 18,159 18,879 19,988
Spain Mazda 15,282 18,297 18,538 19,251 19,206 17,424 17,498
New Zealand Mazda 10,089 11,236 12,151 11,751 12,110 12,237 12,318
Poland Mazda 9,335 11,232 11,338 11,563 12,242 10,977 10,951
France Mazda 8,473 10,387 11,851 11,136 10,970 9,764 10,450
South Africa Mazda 9,066 12,049 13,373 9,696 6,463 5,955 10,181
Italy Mazda 7,357 10,954 10,527 10,489 9,957 8,861 10,000
Austria Mazda 10,101 10,025 10,463 10,541 9,890 8,961 9,794
Netherlands Mazda 8,295 8,815 9,566 9,910 9,290 8,448 9,752
Malaysia Mazda 14,325 12,493 9,730 12,624 12,079 9,940 8,837
Isuzu 0 0 0 0 0 0 796
Malaysia sub-total 14,325 12,493 9,730 12,624 12,079 9,940 9,633
Iran Mazda 3,031 11,840 6,949 7,483 6,132 6,617 7,127
Switzerland Mazda 9,930 10,103 7,878 6,805 6,885 6,119 6,916
Belgium Mazda 5,741 7,353 7,739 8,163 7,030 6,243 6,776
Ecuador Mazda 3,651 2,546 4,062 5,590 5,466 5,789 6,042
Philippines Mazda 4,177 4,090 5,247 5,108 5,894 5,527 5,357
Isuzu 0 0 0 0 0 131 620
Philippines sub-total 4,177 4,090 5,247 5,108 5,894 5,658 5,977
Sweden Mazda 5,579 6,607 5,836 5,324 4,903 4,149 4,322
Singapore Mazda 5,287 7,091 8,509 7,805 6,685 5,484 4,281
Indonesia Mazda 8,895 5,107 3,861 4,557 3,681 3,667 3,915
Peru Mazda 3,435 3,215 3,338 3,381 3,603 3,682 3,903
Denmark Mazda 4,923 5,310 4,755 4,429 4,183 3,559 3,694
Egypt Mazda 1,924 546 784 1,134 2,442 3,326 3,217
Ireland Mazda 2,236 3,011 2,678 2,402 3,030 3,091 3,168
Norway Mazda 6,621 6,515 4,217 3,930 3,675 3,142 3,124
Czech Republic Mazda 2,637 3,107 3,291 3,356 3,394 3,014 3,013
Hungary Mazda 1,587 1,945 2,197 2,565 2,972 2,755 2,680
Ukraine Mazda 2,261 2,342 2,765 3,310 2,920 2,757 2,613
Portugal Mazda 1,468 2,615 2,766 2,557 2,571 2,195 2,346
Romania Mazda 1,095 1,583 1,946 2,168 2,496 2,419 2,339
Slovakia Mazda 1,545 1,925 1,894 1,860 1,930 1,764 1,767
Finland Mazda 1,628 1,967 1,745 1,635 1,860 1,694 1,731
Turkey Mazda 1,761 1,427 1,412 1,229 1,363 1,263 1,265
Slovenia Mazda 936 1,106 1,231 1,195 1,225 1,120 1,155
Bulgaria Mazda 603 703 712 908 952 861 878
Estonia Mazda 315 444 616 622 716 646 658
Luxembourg Mazda 327 561 634 654 589 514 538
Latvia Mazda 120 211 263 267 296 286 326
Lithuania Mazda 167 255 316 389 321 286 295
Uruguay Mazda 126 161 109 158 168 177 180
Kazakhstan Mazda 393 233 165 205 142 121 97
Greece Mazda 0 6 0 35 55 48 61
Brazil Mazda 0 2 2 0 0 0 0

Source: LMC Automotive "Global Automotive Sales Forecast (Quarter 2, 2018)"
* The table above shows data for selected countries, so the total of the country's in the table do not match the Mazda Total.
(Note) 1. Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons.
2. All rights reserved. Reproduction of any data will require permission of LMC Automotive.
3. For more detailed information or inquiries about forecast data, please contact LMC Automotive.


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Key word

Mazda, SKYACTIV X, Co-pilot, CX-5, CX-9, Large Products, US New Plant

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