Why Mazda thinks electric and the driverless car are more hype than reality

One of the world's smaller players in the auto industry is determined to hang on to its independence and its traditions - but the challenges are becoming more forbidding

Mazda CX-5 SUVs on the automated assembly line at the Ujna plant, Hiroshima (The Independent)

“We love cars.”

Masamichi Kogai, president and chief executive officer of the Mazda Motor Corporation announces this during his discussions with The Independent at the firm’s headquarters in Hiroshima. It’s not, strange to say, the sort of thing that you hear all that often from the bosses of the world’s great car companies. Such emotionalism, albeit restrained, also seems a little bit of a juxtaposition with the very conservatively attired Kogai, wearing the sober dark blue suit, white shirt and discreet polka dot tie that is still the uniform for the top echelons of Japanese corporate society. (Women, by the way, are conspicuous by their complete absence from the Mazda board of directors, which is not a strength for any modern concern).

Still, he seems in earnest with his enthusiasm for “fun” . Mazda is one of those car companies - Honda and BMW might be other examples – where the engineers run the show, as opposed to marketing types or accountants, or – as with the likes of Tesla – starry-eyed futurologists with one eye on a mission to Mars. And Mazda is a firm that, to adapt a homely British phrase, seems to want to stick to its sushi. They are, in short, good at making cars with high-revving advanced petrol engines. They are highly sceptical about the rapid electrification of the car market and, even more so, the arrival of the much-hyped autonomous or “driverless” car.

It is refreshing. Almost every press release you see emanating from the car world and indeed form governments is full of talk about the electric autonomous future, and not much about what buyers want in the here and now. One of Kogai's top executives, indeed, is happy to declare that he’d like Mazda to be the last company to enter the world of autonomous vehicles.

Kogai puts the pure electric vehicle share of the new car market at a mere 10 per cent by 2035, a substantially more pessimistic view than that which tends to emerge from brands such as Volvo, or authorities in the UK, the EU and cities such as Athens, Paris and London, where leaders have been talking up the new technologies (though the small print indicates that these include petrol/diesel hybrid cars also fitted with an electric motor).

The reason for Mazda’s more sober approach is simple: “The biggest challenge that we have is the cost of development”, he explains about electric cars. That obviously is also one of the biggest barriers to more widespread acceptability of electric cars among consumers – so compromising the business case on both sides.

Philip Hammond, our ever optimistic Chancellor, believes that the autonomous car, probably powered by an electric motor, will be on British roads, unsupervised, by 2021. It is a tall sort of claim.

Head of Design at mazda Motors, Hiroshi Kureha with clay model of latest concept car (The Independent)

This continued faith in the internal combustion engine is understandable. It has, after all, enjoyed some 130 years of development since Karl Benz’s wife Bertha took the first horseless carriage for a drive around a startled Germany back in 1886. It’s also reflected in the firm’s ad slogan, “zoom zoom”, in their past racing history (such as winning Le Mans) and in their long-standing enthusiasm for the unusual “rotary” design of engine, a powerful and high-revving unit that journalists loved more than customers. More to the point, more than a million drivers have cause to be thankful to Mazda for reviving the open top roadster back in 1989, at a time when the traditional sports car was virtually dead.

The MX-5 was, and is, pretty, reliable, practical, affordable and enjoyable and it encouraged other manufacturers from BMW to Alfa Romeo to enter or re-enter that market. It is perhaps no accident, and with some historic irony, that Fiat chose to base their new 124 roadster on the MX-5, and have it manufactured at the same Japanese plant that the MX-5 is made.

For Kogai, his company is about delivering this sort of “driving pleasure” to enthusiasts, and is sober about the challenges of future technologies. He recognises the potential, but also stresses the high cost of electric vehicles and thinks that reducing those costs – much of which is in the battery packs – is key to the consumer acceptability of these cars – “we need to deliver electric vehicles at very low cost” in his view.

Infrastructure too, he sees as an issue, with the lack of a common global standard for the design of electric car plus and sockets (and, unlike your laptop or smartphone, there are no simple adaptors that can be fitted for the various export markets).

He sees other issues with autonomous cars. In Japan, he reflects, people tend to live very close together and the tightly packed urban environment might not suit autonomous vehicles so well. He also stressed how well these driverless cars can “see” the road if their sensors are dirty or in snow, rain or at night. That makes it more dangerous for a “driverless” car.

That doesn’t mean that Mazda is ignorant about the environment or radical solutions to the problems facing the planet, and it knows it is not big enough to be able to try and dominate every segment of the market.

For Mazda is small by global standards, with a 2 per cent market share across all markets for passenger cars, but it is a global company nonetheless. It’s been exporting cars to the UK, for example, for four decades, and its overall sales are split 202,695 in Japan to 1,356,428 in overseas markets.

Mazda has principal production facilities in Japan, Mexico, Russia, Thailand and China. (production is split at around 900,000 units in Japan and 600,000 in the rest of the world). There are research and design faculties in the US and Germany.

Kogai freely acknowledges that his is a “small scale company with limited resources”. Hence the “capital alliance” and limited technical co-operation with Toyota, which by most measures is the largest car firm in the world. Mazda will be involved in joint ventures with Toyota to build a new plant in the US (Donald Trump will be pleased) and, in due course, hybrid and electric vehicles. Despite that, Kogai assures us, the Mazda Mexico plant at Salamanca is safe.

Mazda benefits from Toyota’s financial strength and sheer industrial muscle. Toyota, Kogai says, can learn from Mazda about how to develop cars quickly and on a limited budget.

As a smaller player and one that has suffered significant financial difficulties in recent years, Mazda has had to make the most of a little, and act nimbly to exploit what opportunities it can in a rapidly evolving and fragmenting market place – and an intensely competitive one with new players emerging, especially in China. Compared to the likes of Mercedes-Benz, say, or VW Group or indeed Toyota, Mazda is not represented in important sectors such as luxury saloons, a Mondeo-sized family hatch or any hybrids, and it lacks a premium badge to extract higher profit margins. The costs of developing new products to reach every niche of the market are prohibitive. Like others in the car industry, collaboration is the key.

With one eye, maybe, on past disastrous industrial combinations, from the UK's own British Leyland, itself subject to a flawed alliance with BMW, through Mercedes-Benz’s marriage to Chrysler, to General Motors unhappy stewardship of Saab, the Japanese majors have moved much more cautiously, and probably wisely. Even today the Renault-Nissan partnership allows each firm significant autonomy.

It so happens that Mazda itself had to try and survive after its long association with Ford (a one-third owner of Mazda Motors) ended during the last financial crisis, when Ford decide to divest itself of many of its subsidiaries (including Jaguar Land-Rover, which went, happily, to Tata of India). In Japan, smaller marques such as Daihatsu, Suzuki, Subaru (Toyota) and Mitsubishi (Nissan) have had to turn to bigger groups too, in varying degrees.

For Kogai, Mazda has to pursue “multi solution” – petrol and diesel powertrains, each with “excellence in CO2” emissions, plus hybrid and electric vehicles “based on each country’s needs…we will meet the needs of the market with the most optimum vehicle”.

Here’s their argument against electric. Mazda claims that a mid-sized pure-electric car (i.e. not a hybrid with a petrol engine on board) consumes about 20kWh of electricity per 100km. If the power is produced with coal, that translates into CO2 emission of 200 grammes per kilometre. A modern internal combustion engine from Mazda emits less. Electric propulsion is, to them, like that old saying of Saint Augustine – “Lord make me pure but not yet.” The answer to the argument, by the way, is that if the energy used to generate the electricity is from renewables, then the CO2 emissions are unbeatable – but we’re nowhere near that use of sustainable power.

Electric may be inevitable, but not for a long time will a business or even an environmental case be made for it. Meantime, we still need to get around.

For autonomous cars, the company also cites public opinion. Polling they’ve commissioned in Europe suggests that two out of three drivers want to be able to drive even if self-driving cars became commonplace. For Mazda, with its roots in Japan, and considering that country’s rapidly ageing population, the best application is thought to be a “co-pilot” system, where the car will detect if an elderly driver has lost control or consciousness and slide them into some safe corner of the highway, and call an ambulance.

Car design, even for a conventional car, is an expensive business – say $1bn to develop an all-new model - and the industry is demanding ever greater volumes to exploit economies of scale in manufacturing, with consumers' tastes changing and demanding ever more form their personal transport.

Add in the challenge of new technologies, including hybrids as well as electric vehicles, and Mazda’s future became clear this year: limited but vital technical collaboration and cost-sharing with a much larger rival in Toyota, whilst protecting its own unique expertise and strengths in conventional petrol and diesel engine design, styling, product development and making “driver’s cars”.

Hence Mazda is still fighting for its independence, which it is determined to cling to despite Toyota taking a 5.5 per cent equity share; Mazda also took an equivalent cash value equity stake in its big brother, but that amounts to a mere o.25 per cent equity share in Toyota. The balance of power is plain.

Behind Mazda’s dogged faith in the internal combustion engine also lies a commitment to its workforce and suppliers, and a recognition that the vast capital in planet and people sunk would be written off in an electric revolution.

They have a saying at Mazda: 100 - 1 = 0, meaning a one per cent fault rate is equivalent to the 100 per cent fault rate for the unfortunate buyer who ends up with a lemon. A bit cheesy, yes, but evidence the that commitment to quality that built the Japanese industry is still there today. As it happens the guys at the highly efficient and flexible Hiroshima factory make the fault rate nearer to two per cent, but you get the drift of their commitment to quality. All around are lengths of cord ready to stop the assembly line should a worker discover some systematic problem (though almost everything is done by balletic teams of robots these days).

But is their faith in the internal combustion engine justified?

Jeff Guyton, chief executive of Mazda in Europe, comments that the company concentrates on “real world results…the real energy cycle. Our perspective is ‘well to wheel’ and we happen to think we can make fossil fuels work better…we can improve efficiency of conventionally powered vehicles and only at that stage move to electric vehicles”.

Mazda is even putting investment into “carbon-negative” (ie CO2 reducing) technology that will make biofuel from algae, at some net benefit to the environment, an idea, I recall, that Saab of Sweden, another small player in the industry, was working on too before they collapsed in 2011.

Guyton adds: “There’s lots of noise about electrification but regulators need to be clear about what they want as an outcome and then leave the engineers to do with work”. It is certainly true that electric cars have only really made their presence felt strongly in places where heavy incentives, ie subsidies, are available, such as Norway. And while battery prices may fall over the medium term, a massive increase in demand for them and the raw materials (cobalt and lithium) that go into them, might reduce the rate at which battery costs decline, or even reverse that trend. Thinking about governments, and the huge income they generate from the traditional automobile, Guyton also wonders aloud “where will the tax revenues come from?” The days of lavish subsidies - some £5,000 per vehicle in the UK – may not persist.

Kioshi Fujiwara – Fujiwarasan to his colleagues – is the director with oversight of R&D, and is even blunter. He would be happy if Mazda was to be the “last company to press the switch for autonomous drive” and claims that “there is not any company making money out of electric cars today”, adding, with a mischievous grin, that some famous names are not producing “real cars”. He says, unprompted, that Mazda’s attempt to develop its own premium brand (analogous to Toyota and Lexus) which was called “Xedos” was a “total failure” because customers didn’t see it as an upmarket brand. All Mazda can do is to use technology and design to “exceed customers' expectations”. He likes to think that the generation of technologies after this one will make the electric car more feasible: Artificial intelligence, induction (ie cable free) charging, and solid state electronics and capacitors supplementing, or replacing batteries. Half-jokingly, Fujiwara mentions the Dyson adventure in that context.

Since Mazda got out of the cork-making business and into primitive little sedans more than half a century ago its managed to do just that, though not without incident. Sometimes Mazda’s rusted rather spectacularly, and its rotary engines - a true revolution –were an entertaining dead-end, suffering from high emissions and fuel consumption, something almost finished the firm off in the 1970s oil crisis.

It was also lucky to survive the loss-making years after Ford pulled out in 2008. Mazda could also try for a little more gender and cultural diversity in its highest levels of control, especially for a company that retains global aspirations and needs to stay in touch with planet earth (which is not identical to Japan, shall we say). So it’s known tough times over the decades; and the next half century will be even tougher. Just as well Mazda loves cars.