As our regular readers are well aware, 2013 has been a blockbuster year for Mazda. Lots of awards, lots of recognition and, consequently, lots of sales have all made this year one of the best Mazda’s had in the past decade.
However, as we’ve written about before, a big part of Mazda’s profits in 2013 are due to a relatively weak yen. Since their business model relies heavily on exports, the shift in currency exchange rates makes the math work in Mazda’s favor, but the Yen won’t stay weak forever. The general criticism is that Mazda needs to focus on local manufacture like their larger Japanese brethren, Toyota, Honda and Nissan, all of which have launched new international facilities within the past year.
With that criticism in mind, it might come as a surprise to hear that despite a substantial increase in sales throughout Europe, Mazda has no plans whatsoever to localize their operations there.
During the first half of 2013, European sales have increased by 5.4 percent since the same time in 2012. According to ACEA, these increased sales have allowed Mazda to stake their claim on an additional .2 percent market share in Europe. These are small, but very meaningful gains in the tough-to-crack European market.
Automotive News Europe had the chance to correspond with Mazda Europe CEO Jeff Guyton to discuss the Japanese brand’s plans for Europe, and what Guyton had to say is quite revealing. Essentially, even though sales have increased and are still increasing in Europe, they’re nowhere near what they’d need to be to justify a European plant. Furthermore, Mazda is not looking to shake up its business model to account for a strengthened Yen. They must have great faith in Abenomics, that’s all I can say.
Guyton explains, “Our intention is to have manufacturing scale. That gives you scale of economy and quality through repeatability.” In other words, the efficiency and savings associated with running a single, really big Japanese factory outweigh the saved exporting costs that would come with a local European factory (or any local factory, for that matter).
With economies of scale in mind, Guyton goes on to assure us that the smarties working at Mazda have run the numbers. Apparently, a European factory will continue to be unfavorable until the Japanese automaker is selling 200,000 units per year of a single model.
To put that in perspective, total sales in Europe this year across the range have been 74,419 units. Even if Q3 and Q4 continue to trend upwards, you’re looking at 160,000 total sales by the end of 2013. Assuming Mazda enjoys the same 5.4% sales increase year after year, it would be 2018 by the time they’d reached 200,000 total sales in Europe. And again, they need to sell 200,000 units of a single model to make a local plant worthwhile.
All that to say, Mazda expanding production into Europe is nowhere close to the horizon without a phenomenal increase in sales. Guyton estimates that they’d need to double their best year ever when they sold 320,000 units in Europe to realistically justify a new plant.
So, after a lot of math and a lot of speculation, Mazda is just going to continue doing what they do best – creating well-designed cars with excellent fuel-economy through their SkyActiv technology. The “build it and they will come” business model has to work.leave a response, trackback from your own site