Restructuring of a commercial enterprise in China to help Mazda Motor improve its competitive position

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The restructuring, which made Changan Mazda Automobile Co., Ltd. (CMA), a new venture, and the FAW Group as a stakeholder in CMA, may prove to be a “smart move” for Mazda in China, which is struggling to decline sales in the country.

“Mazda’s existing separate joint ventures with Changan and FAW were not performing well in China. The company’s overall sales fell, with FAW-Mazda JV being the main reason for the decline. Mazda’s net profits were also down for the past two years. The new business will allow the sharing of costs and resources for better profitability.

“With new technological and production capabilities combined, Mazda will gain a competitive advantage in China. Currently, it has a smaller market reach than other Japanese OEMs such as Toyota, Nissan and Honda, which sell over a million units while Mazda only sells around 200,000, even with its two partners.

“Changan Mazda was previously a 50/50 joint venture between the two companies and has recently opened up to an influx of new investment into the business. However, FAW had a 60:40 business with Mazda named FAW Mazda Motor Sales Co., Ltd. (FMSC). FAW will use its existing shares of FMSC to purchase a stake in the new company and will continue to operate Mazda-related businesses under the new entity. With this, the investment structure now increases to 47.5% Changan, 47.5% Mazda and 5% FAW Group.

“Currently, Changan made five models and FAW two models for Mazda. The new company will be better from a product development perspective, but with limited operational issues. In addition, the two state-owned Chinese automakers have significantly invested / partnered for new technologies with OEMs and other players that will give positive impetus to Mazda in China.

Credits: Bakar Sadik Agwan, Senior Automotive Consulting Analyst at Global data

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