New Mazda CEO says no discounts in drive to boost sales

Eyes annual sales target of 1.7 million vehicles in three years

Mazda Motor Corp will hit its aggressive annual sales target of 1.7 million vehicles in three years without relying on discounts, its new chief executive said, helped by its new fuel-efficient technology and the yen's depreciation.

In the global auto market with an annual demand of around 80 million vehicles, Mazda is a second-tier player that sells around 1.2 million vehicles a year.

Because it does not have the sales volume to profitably make cars overseas, Mazda has relied largely on exporting from Japan, a business model that led it to post net losses totalling $2.5 billion over four consecutive years while the yen was strong.

But in the year ended March Japan's fifth biggest carmaker finally turned to profit, backed by changes both in and outside the company.

Within, a set of engineering-driven changes is materializing after some seven years - a new fuel-efficient, profitable Skyactiv technology and a new production system.

Outside, the yen started to depreciate in mid-November. Mazda, which makes three-quarters of its vehicles in Japan and exports around 80% of that number, benefited the most among Japan's seven carmakers, its shares quadrupling in value.

"We will hit our target of 1.7 million vehicles. And we do not want to do this by relying on sales incentives or cut-rate sales to fleet operators," Mazda's CEO Masamichi Kogai told Reuters in an interview earlier this month.

Image makeover

Now 59-year-old Kogai, who took the top job in June, is on a drive to boost Mazda's brand image and profitability. An engineer who once headed Mazda's Hofu plant in western Japan is betting on the new Skyactiv models to raise vehicle sales by 40% by the year ending March 2016.

Mazda has already applied its Skyactiv technology, which includes a gas or diesel engine with improved fuel efficiency of 15-20% and weight cut of around 100 kg, in the popular CX-5 SUV and the Mazda6 sedan and hatchback.

It is now also being fully introduced in the Mazda3 going on sale starting in the United States this month. The compact car is the company's most popular model, last year accounting for about 30% of its total vehicle sales.

Under Mazda's new manufacturing system, engines, transmissions and other key components share common structures so they can be used among various vehicles and its flexible assembly line lets it run multiple models down a single line.

As a result of these efforts, profitability is up. In the case of the CX-5 SUV, profit per vehicle rose by about $1,500 from an older, higher grade model the CX-7, Mazda has said.

About a third of the cars Mazda sold last financial year were Skyactiv models and that will rise to half this year.

Mazda expects to post an operating profit of 120 billion yen this financial year, more than double last year's, and a mean of forecasts by 20 analysts is at 171 billion yen.

Yet some analysts are wary of Mazda's mid-term sales goal. "If they try to hit the target of 1.7 million vehicles, it may be forced to increase incentives," said Koji Endo, an auto analyst at Advanced Research Japan.