Auto Alert August 2018

The MX-5 roadster is a good example of Mazda’s out-of-the-box thinking

Mazda’s Fifty Million

During May, the Mazda Motor Corporation celebrated the production of its fifty-millionth vehicle in its home country of Japan with a ceremony at the Hofu Plant in Yamaguchi prefecture. This was the culmination of a journey that first started in 1920, when the Toyo Cork Kogyo Company was founded in Hiroshima. The company was renamed Toyo Kogyo Company Limited in 1927, and in 1931, it produced its first vehicle, a three-wheeled truck known as the Mazda-Go autorickshaw. In 1960 Toyo Kogyo entered the passenger car market with the Mazda R360 Coupe micro-mini, which was powered by a rear-mounted two cylinder air cooled four-stroke engine. A second plant was opened at Hofu in 1982, but the company, which was formerly renamed Mazda Motor Corporation in 1984, is still headquartered in its original location of Hiroshima.

The Mazda brand has occupied a somewhat unique position in the global automotive industry. While it has never achieved the massive volumes needed to be a serious contender for industry leadership, it has achieved considerable significance for a number of reasons. One of these was a relationship with the Ford Motor Company, which ran from 1979 to 2015, and resulted in the large-scale sale of Ford-badged Mazda products through the American company’s global distribution network. During this period, Ford held a stake in Toyo Kogyo/Mazda which peaked at 33,4% in 1996, but, was progressively scaled down from 2008 to finally be sold off completely in 2015. This left Mazda looking for new partnerships, which subsequently led to product-specific co-operative arrangements with Fiat Chrysler Automobiles (sports roadsters) and Isuzu Motors (pickup trucks). In August 2017, Mazda entered a cross-shareholding relationship with Toyota Motor Corporation which covered technology, product sharing and the building of a $US 1,6 billion joint assembly plant in the United States. Shortly after the announcement of this arrangement, Mazda announced the planned introduction of what was claimed to be the world’s first Homogeneous Charge Compression Ignition petrol engine, the Mazda Skyactiv-X. This engine will be supercharged, and employ spark ignition for cold starting and conditions when the combustion temperature is too low to support full-time HCCI operation.

From a technical viewpoint, perhaps the most significant event in Mazda’s heritage was the acquisition of a licence for rotary engine technology from German originators, NSU Motorenwerke AG and Wankel GmbH in 1961. Following further development of the concept, Mazda commenced commercial sale of the world’s first twin-rotor rotary engined production car, the Cosmo Sport 110S, in May, 1967. A total of 1 176 of these pioneering cars were sold, and experience with this and subsequent rotary-engined Mazda models such as the Familia Coupe, R100, Savanna, RX-2, Luce, Eunos Cosmo, RX-7, RX-8, and 787B sports racer revealed exceptional performance for the nominal engine displacement of around 1,2 – 1,3 litres. However technical challenges including heavy fuel consumption, high emissions levels and wearing rotor tip seals combined with sundry world petrol price crises, served to restrict the rotary engine’s appeal as a viable propulsion option, and Mazda returned to developing new-generation reciprocating powerplants for most of its mainstream model lines. Nevertheless, it can still be expected that the rotary engine will re-emerge in Mazda’s product lineup sometime in the future.

In more recent times, Mazda has continued to explore “alternative” product directions while still producing a highly saleable range of mainstream products. The most significant of these has been the MX-5, also known as the Miata, which emerged as a brilliant idea to create a modern interpretation of an affordable 1960’s “British” sports car. The first generation MX-5 appeared at the Chicago Auto Show in 1989, notably with a “traditional” north-south front-mounted engine and rear-wheel-drive layout, but Mazda had dipped into its parts bin for modern major components, and the end product was a most rewarding and totally reliable driving experience. The MX-5 has gone on to become the world’s best-selling two-seater sports car, and in April, 2016, Mazda announced the production of the one-millionth unit at its Ujina Plant No.1 in Hiroshima, Japan. The latest version has departed slightly from the rounded looks of its predecessor, with more modern “edgy” styling, but continuing sales success has confirmed that Mazda has maintained the MX-5 spirit, with the model still acting as a very successful “halo” for the brand.

The writer and his family have had their own positive experiences with Mazda products, ranging from a 1300 sedan in the early seventies, through a 1993 323 200i sedan, a 323 1600i Sting hatchback in Year 2000, to an Etude 160ie sedan purchased in 2001. Without exception, these all provided enjoyable ownership experiences, giving reliable and economical service, but the cream of the crop was undoubtedly the 323 200i sedan, which, with its powerful 109 kW DOHC 16-valve engine, easy-changing 5-speed transmission, lowered suspension, low-profile radial tyres and well-balanced appearance, turned out to be something of a pocket rocket. There have been a number of occasions in which we have regretted not keeping that car for considerably more than our nine years of ownership, because it still had the potential to provide much interest and motoring pleasure, even when compared to more modern offerings from competitive brands.

Fiat Chrysler Automobiles Looks Ahead

The emergence of FCA as a global force from the ashes of Chrysler’s bankruptcy has been one of the major automotive stories of the Twenty-first Century. CEO Sergio Marchionne, undoubtedly one of the more controversial leadership figures in the industry and chief architect of the Fiat-Chrysler merger, has been working through the strategic five-year plan he announced in 2014, with its primary target of almost doubling of the group sales volume from the 2013 level of 4,4 million units to nearly seven million. Important components of the original plan included the refining of the group product mix, realignment of the market positions of some brands, and the achievement of platform and component rationalization across nameplates, and even continents. However, the group’s global sales achievement of only 4,74 million unit sales in 2017 seems to indicate that it has effectively marked time and will struggle to achieve the ultimate volume objective in 2018. Nevertheless, FCA reportedly returned a profit of $US 4,4 billion, and halved its debt, in 2017, so, while the five-year plan has not yet produced the solid move up the volume rankings that Marchionne desired before his planned retirement at the end of 2018, the group has made considerable progress in terms of financial viability .

The planning process continues, and the FCA group published brand strategies for the next five years as part of a presentation to financial analysts in June. Surprisingly, the “parent” Fiat and Chrysler brands were reported not to be contributing significantly to the group’s bottom line, so some action, including the rumoured discontinuation of the Chrysler nameplate, can be expected to address that situation in the near future. The group has articulated a broad objective of raising its transaction price levels in a quest for improved profitability. The June announcement concentrated mainly on Jeep, Alfa Romeo, Maserati and Ram, with an up-front statement that the first three brands would no longer offer diesel engines in Europe, and be switched to mild hybrids, plug-in hybrids and full-electric vehicles for their alternative powertrain strategies. Jeep’s market coverage would be expanded to enter three new segments, including a new car-like utility vehicle, a pickup, and 3-row premium sports utility vehicles. It would also offer electrification options across its entire range by 2021, and increase its number of trim line offerings. The brand’s production capacity is to be increased threefold in Europe, and also significantly increased in Latin America and North America. The strategy objective is to increase Jeep’s penetration of the global utility vehicle market from the present level of nearly six percent to more than eight percent by 2022.

Important elements of the original five-year plan were the revival of Alfa Romeo as an iconic nameplate, and the increase in global sales volumes of the brand from the 2013 level of 74 000 units to more than 400 000 units. Continuing the pursuance of this objective, Alfa is to offer hybrids, e-booster powertrains with 25% more power and zero turbo lag, and plug-in hybrids with ranges beyond 50 kms, paired with 0-100 km/h acceleration times of just more than four seconds. The future model line-up will include a new 8C sports car powered by a 700+ hp mid-mounted twin-turbo V-6, a four-passenger all-wheel-drive GTV with 600 hp, long-wheelbase Giulia sedan and Stelvio SUV models for the Chinese market, plus more compact and midsize SUV’s. The autonomy (self-driving) levels of Alfa models are also to be increased.

The revival of Alfa Romeo’s fortunes continues to be an important part of FCA’s planning

The revival of Alfa Romeo’s fortunes continues to be an important part of FCA’s planning

Maserati’s market and portfolio expansion is to be continued, with a strong emphasis on electrification under the Maserati Blue brand. Upcoming products which will utilise new lightweight platforms, Ferrari powertrains and a three-motor AWD system with torque vectoring will include the aluminium spaceframe Alfieri “halo car” Grand Touring coupe and cabriolet, and new Quattroporte sedan and Levante SUV models. The North American Ram truck brand, the successor to the Dodge Truck Division since 2009, also came under the spotlight, with plans for a new performance pickup designated TRX, a new heavy-duty pickup, and all-new Promaster City van, the North American version of Fiat’s European Ducato. Ram global volumes are projected to reach just under one million units in 2022, up from the present level of around three-quarters of a million.

Rationalisation of the Chinese Motor Industry?

As far back as 2001, we read that there were more than 120 separate car and truck factories in mainland China. By 2003, domestic Chinese vehicle production had reached 3,6 million units, and the outlook for 2005 was an “astonishing” 5,3 million units. Since then, of course, the industry’s output has grown exponentially, and is currently servicing a domestic market that totals in excess of 22 million units per annum, making it the largest in the world by a considerable margin. One recent published estimate is that there are “about 70 major vehicle manufacturers in China”, with a substantial number of suppliers and smaller entities contributing to the output. The massive and rapid growth has resulted in some unusual characteristics emerging in the industry, one of which has been the appearance of visually almost identical but technically inferior copies of iconic global brand products. Clearly the overheated domestic market demands that participants offer attractive products, but does not provide all manufacturers with the critical mass needed to amortise the cost of developing their own unique, quality vehicles. Some less ethical companies have eagerly grasped the short-term profit opportunity provided by buyers that are more interested in appearances than the technical excellence of the vehicles they drive.

Is Chinese manufacturer Chery ripe for picking by a foreign investor?

Is Chinese manufacturer Chery ripe for picking by a foreign investor?

The Chinese government has recognized the dangers of an over-proliferated manufacturing industry, with many participants that are owned by local, provincial or central government institutions. This situation has been brought into sharp focus by a recent deceleration in the growth rate of domestic sales. Even though the market is still expected to reach 35 million by 2025, there is an obvious need for Chinese manufacturers to more vigorously attack the global market than presently. It has been said that the industry would need to improve technology and quality, develop an international mindset, and develop clear brand identities. There has also been a recent call for less profitable state-owned manufacturers to seek out takeovers by private or outside investors, and this has been facilitated by the recent removal of legislation that previously required foreign automakers participating in the Chinese market to operate in partnerships with local companies, and the cutting of tariffs on imported vehicles from 25% to 15%.

The authoritative website Automotive News China recently reported an industry prediction that at least one third of China’s vehicle makers would get squeezed out of the business by global competition, and the increased emphasis on electric vehicle production by joint ventures between Chinese and foreign manufacturers. One of the major state-owned manufacturers that has been identified as needing foreign investment is Chery Automobile Company, which has reportedly been working at around half of its annual production capacity of more than one million vehicles, and losing substantial sums of money. It has been reported that state-owned Chinese companies in the petrochemical, telecommunication, railway and civil aviation sectors have shown the way in successfully sourcing private capital, and the government would like its motor manufacturing operations to follow suit.

It would be wise for South African representatives of Chinese vehicle brands, and their dealer networks, to keep careful watch of these developments, because manufacturers entering into global partnerships would logically seek to benefit from access to the well-established and effective distribution networks, off-shore assembly operations and product support structures of their partners. Local distributors who have made substantial investments in inventory, bricks and mortar could find themselves sidelined by emerging international tie-ups, should they result in the integration of Chinese brands into global supply networks. There would seem to be a more of a risk to local operations offering only a limited range of specialist vehicles to the market, such as heavy trucks or minibus taxis, in a scenario where the supplying Chinese manufacturer perceives a benefit of being part of a broader enterprise offering a more comprehensive range of vehicles to local buyers.

To Show or Not to Show?

Back in May, Volkswagen AG announced that its main brand would not be exhibiting at the 2018 Paris motor show, thereby joining the ranks of non-participants that already included Ford, Opel, and Volvo Cars. An independent German analyst suggested that VW’s reasons for not participating included savings needed to offset the multi-billion dollar costs associated with the brand’s “dieselgate” emissions/fuel consumption scandal, the estimated € 50 million cost of participation in a major show, very poor perceived benefits for customer ties and image, evidence of the technology battleground related to connected and autonomous cars, competing events, and a drop in visitor numbers at motor shows since 2000. In June Volvo Cars announced that it would skip the 2019 Geneva Motor Show, stating that it was shifting to a more purpose-specific communication strategy, using venues such as the Milan fashion week, used for the 2017 XC40 compact SUV launch, and the driveway of a suburban Stockholm home, the scene of the recent V60 wagon launch.

Participation in motor shows has also been the subject of a long-running debate in the local motor industry. This came to a head in November, 2015 when it was announced that the Johannesburg International Motor Show, last held in 2013 at NASREC, had reached the end of the line, and was to be replaced by the South African Festival of Motoring at the revamped Kyalami Grand Prix Circuit. JIMS, and its Auto Africa predecessor, had for many years provided a world-class experience to the local industry, and its supporting public. The local operations and agents of global automotive groups always exhibited new products and technologies, and the exhibition format encouraged a high standard of display, with some of the glitz and glamour associated with international motor shows. However, the JIMS format was not universally popular with all exhibitors, because of the enormous costs incurred in presenting a world-class display. However, it did give the local industry, at the highest level, a rare opportunity to interact with its public without the intervening filter of dealer involvement.

We will be watching unfolding international and local developments with interest.

 The continuing relevance of major motor shows is being questioned by some major industry players

The continuing relevance of major motor shows is being questioned by some major industry players

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Automotive Export Manual 2019