Mazda May Lower China Target After Slump, President Says

Mazda Motor Corp. (7261), Japan’s most export-dependent automaker, said the company may cut its midterm China sales target after deliveries in the world’s biggest car market fell for 17 straight months.

The company’s plan for China sales to reach 400,000 units by the year ending March 2016 “may be revised,” Masamichi Kogai, who was promoted to president in June, said in an interview last week. Hiroshima’s biggest company is forecasting China sales to only reach 200,000 this fiscal year.

While no Japanese carmaker has seen a bigger turnaround -- in terms of profits or share price -- since the yen began weakening almost a year ago, Mazda has yet to emerge from its slump in China. After reshuffling its top management in the country this year, Mazda is now betting that the locally produced CX-5 SUV and Mazda 6 will help spur a recovery.

“Mazda is switching to local production of their top models in China now, so once that kicks in, sales should pick up,” said Koichi Sugimoto, an auto analyst at BNP Paribas SA (BNP) in Tokyo. “Their products are improving, and the models they’ll be introducing fall under the popular category in China too.”

Mazda’s sales in China have fallen 21 percent in the first eight months of the year, making it among the worst performers.

Photographer: Yuriko Nakao/Bloomberg

Masamichi Kogai, president and chief executive officer of Mazda Motor Corp. Close

Masamichi Kogai, president and chief executive officer of Mazda Motor Corp.

Close
Open
Photographer: Yuriko Nakao/Bloomberg

Masamichi Kogai, president and chief executive officer of Mazda Motor Corp.

Reversal of Fortune

Investors haven’t been too worried. Mazda has surged fourfold in Tokyo trading since late October, when the historically strong yen began crashing -- it fell 21 percent to a 4½ year low against the dollar within six months. Before that, Mazda’s heavy reliance on exports made the stock so unpopular that it was headed to be the worst-performing Japanese car stock for a second straight year.

Mazda’s not alone in struggling in China. Sales at Japanese automakers from Toyota Motor Corp. (7203) to Honda Motor Co. have yet to fully recover since a diplomatic row over a group of uninhabited islands fueled a wave of anti-Japan protests a year ago. Even so, Mazda’s slump predates the islands dispute.

Aversion toward Japanese brands has been a boon for carmakers such as Ford Motor Co., which has seen China sales surge 50 percent during the first eight months. According to estimates by state-backed China Association of Automobile Manufacturers, the country will see total vehicle sales reach 20 million units this year.

By contrast, Mazda’s sales in the U.S. are picking up. Deliveries rose 26 percent in August, helped by surging demand for the new Mazda 6 and the CX-5, which have been equipped with a fuel-saving system the company calls SkyActiv technology. For the first eight months, sales climbed 6.8 percent.

Photographer: Yuriko Nakao/Bloomberg

Masamichi Kogai, president and chief executive officer of Mazda Motor Corp. Close

Masamichi Kogai, president and chief executive officer of Mazda Motor Corp.

Close
Open
Photographer: Yuriko Nakao/Bloomberg

Masamichi Kogai, president and chief executive officer of Mazda Motor Corp.

Alfa Romeo

U.S. demand, coupled with the falling yen, is helping profits as the company forecasts net income will more than double to 70 billion yen this fiscal year. Recent profits haven’t been enough to offset accumulated losses that prevent Japanese companies from paying dividends. Mazda aims to resume payments by March 2016, Kogai said.

Separately, Kogai said Mazda’s joint effort with Fiat SpA (F)’s Alfa Romeo to develop a roadster will be a one-time project and that the Japanese company is continuing to do research on its discontinued rotary engines.

Kogai joined Mazda in 1977, overseeing production and purchasing. Takashi Yamanouchi, Kogai’s predecessor who is now the carmaker’s chairman, was the president for five years.

Echoing comments from other automotive chieftains, the new Mazda president said one of his longer-term tasks will be to help revive interest in cars from younger consumers.

“Our global market share is 2 percent, but we’d definitely want to expand that, especially young people,” Kogai said. “It’s said that young people in Japan don’t need cars anymore, but we want to explore and create new markets.”

To contact the reporters on this story: Anna Mukai in Tokyo at amukai1@bloomberg.net; Ma Jie in Tokyo at jma124@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.