Sales were up 4.5 percent through November in an overall market up just 0.4 percent. But sales dropped 2.8 percent in 2017 and 6.7 percent in 2016.
Leaning on its partnership with Toyota Motor Corp. could help. Mazda has entered into Toyota's electric vehicle joint venture project, and it is jointly building a factory with Toyota in Alabama. That plant, slated to open in 2021, will add 150,000 units of capacity for Mazda — all of which will be devoted to a new crossover for the U.S. The goal: Boost global sales volume to 2 million vehicles in the fiscal year ending March 31, 2024, from 1.6 million last year.
Marumoto, 61, speaking through an interpreter, sat down this month with Asia Editor Hans Greimel to discuss plans for improving Mazda's production system, overhauling the U.S. dealer network and continuing development of the brand's hallmark rotary engine. Here are edited excerpts.
Q: What is Mazda's outlook for the U.S. market in 2019?
A: External predictions say that in 2019, the U.S. market will be at the level of 17 million units. But in reality, it's been slightly decreasing. In mid-next year, if the American economy weakens, then automobile demand will weaken as well. I believe the light-truck mix is going to increase.
Does Mazda have extra capacity to increase light-truck output?
What Mazda needs to consider is how to flexibly and speedily address that shifting trend. We still have open capacity in Mexico and China. By fully using existing capacity, we are able to produce just over 1.8 million units a year. Flexibility is very important. We produce light trucks and passenger vehicles on the same production line. So what is critical is how to change the mix on the same production line. Of course, that's extreme. Currently, our lines in Japan can increase output of a model by 0 percent to 10 percent to match changing demand. And the range can be 0 percent to 50 percent by the time when an introduction of the new generation products are completed.
What we are discussing internally is how to consider the production facility or equipment needed to change the mix in an extreme way, from 0 percent to 100 percent in a production line. Of course, that's extreme. Currently, our lines in Japan can increase output of a model by 0 percent to 10 percent to match changing demand. And the range can be 0 percent to 50 percent by the time an introduction of the new-generation products is completed.
How much change or investment is needed to do that?
The body shop poses the biggest issue. Even within the body shop, the main line is flexible. But we didn't have enough flexibility within the model-unique areas. That means we need to improve the flexibility significantly in the body-unique process areas.
When will Mazda start implementing the change?
We will start to roll out the flexible lines timed to new model launches. So we envisage completing the changeover in five or six years. And we will continue to implement swing production between our Japanese and Mexico plants. For example, we can build the Mazda3 in Mexico and Japan. So if demand is more than we expected, there might be a shortage of capacity in Japan. If that's the case, we can produce more of the Mazda3 in Mexico. We'll be ready to produce passenger cars and crossovers at every plant.
What is your outlook for Mazda's U.S. sales next year?
Sales volume is an important metric. But we would like to prioritize the profit and cash flow of Mazda dealers as the critical business metric. We are working on a U.S. sales network reform and marketing innovation and also enhancing our certified pre-owned program. Starting with the new Mazda3, we'll be launching new-generation models, and by doing all these initiatives, we want to improve the profit and cash flow of dealers. As a result, we hope to see a volume increase.
What kind of sales increase does Mazda expect next year?
If we mention a certain number as a sales volume, I think people will tend to put incentives on to sell a certain volume. What is most important is the right-price strategy.
Does Mazda still plan to build a U.S. sales network capable of selling 400,000 vehicles a year?
We want dealerships, or the sales network, to have the capability to do 400,000 units eventually, as a result of these actions. Mazda and dealers have been making investments in network enhancement and marketing. Starting with the new-generation Mazda3, new- generation products are going to be introduced. So profit and cash flow are going to be improved.
When will Mazda achieve that network?
We hope to achieve that in calendar year 2021 or 2022. That is when we will launch the new product at our Alabama plant.
It is sometimes said that autonomous driving is not a top priority for Mazda. Is that true?
That's a bit of a misunderstanding. What Mazda says is that no matter the era or driving needs, we are going to stick to providing driving pleasure. Our concept of autonomous driving technology is different from the trend of having a driverless vehicle or a vehicle without a steering wheel.
The technologies we are going to utilize are the same as fully autonomous driving technologies used in fully driverless vehicles. But what we are trying to do is provide driving pleasure for the driver. When the driver makes an error or falls ill, then the system will override so that the vehicle pulls over to a safe place. That is the co-pilot system we are pursuing.
We are going to conduct real-world verification tests in 2020. Then in 2025, we want to introduce a vehicle with that technology.
Is Mazda able to develop all those technologies by itself?
Of course. Although Mazda is a small player, it has been enhancing model-based development as a core technology to efficiently develop environmental and autonomous technologies. Model-based development is something Boeing actively does because they aren't able to make many prototypes when they create an airplane. They make models and do simulations to develop control technologies. We are confident that Mazda is in the top three worldwide when it comes to model-based development in the automotive industry.
What is your thinking about capital relationships with companies such as Toyota?
We want to continue to be an independent brand and an independent company. For small players like Mazda to survive, in the areas of technology, product and sales, we need to have some distinctive element to differentiate ourselves from the crowd. We'll work in collaboration with partners in some areas, but by enhancing our distinctiveness at the same time, we should be able to survive.
What makes Mazda distinct?
It comes down to driving pleasure. We have distinct design and excel in internal combustion engine technology and also in model-based development. We are not going to be wavering away from that.
Has Mazda been able to improve transaction pricing as much as you'd like?
It is increasing, but it hasn't reached the level we expect. We'd like to improve that further with our new-generation products. Brand recognition is one reason. At the same time, we need to look at the customer experience at the dealership outlets. This also has to meet customer expectations. Mazda and dealers have started investing in improving customer experience at dealerships. We started working on that full scale in January 2016.
How long will the U.S. retail reform run?
Our target is to have 300 next-generation branded stores in 2021 and to improve the average throughput to 1,000 units per outlet a year. Now we have annual sales of around 300,000 units and 550 dealer outlets. So by 2021, we expect to have 300 next-generation branded stores, plus more than 200 of the older outlets. We have 47 next-generation outlets at the moment. But we have about 200 others that are committed to converting to next-generation branded stores or already under construction. So there are about 250 already. It's a good pace.
What are Mazda's expectations for the upcoming Skyactiv-X powertrain?
Mazda is going to commercialize an engine that everybody has worked on for 110 years but so far failed to achieve. It's a one-and-only engine in the whole world. It has excellent driving dynamics and also provides excellent fuel economy. While Mazda has strength in development and engineering and manufacturing, we admit that our marketing and sales are not at the same level. We have been enhancing collaboration with marketing and sales. By doing that, we should be able to correctly appeal to the customers. In the near future, our marketing and sales will have sufficient capability at the same level as our engineering.
What about introducing a sports car successor to the RX-8 to raise your image?
We have concept cars like the RX-Vision or Vision Coupe, and we are often asked when they will enter mass production. To produce a vehicle powered by a rotary engine — and not just using a rotary engine as a range extender — is a dream of everyone at Mazda. But we are not in a business environment now where we can start building rotary engine vehicles straight away. One of my tasks is to create an environment in which we can make that dream a reality. Of course, that's extreme. Currently, our lines in Japan can increase output of a model by 0 percent to 10 percent to match changing demand. And the range can be 0 percent to 50 percent by the time when an introduction of the new generation products are completed.