Mazda's New Growth Engine, Literally: Diesel

Anton Wahlman profile picture
Anton Wahlman
6.97K Followers

Summary

  • Mazda sells 74% of its CX-5 diesels in Japan and 58% in Europe. In the U.S. thus far: Zero.
  • Assuming a 15% diesel take rate (similar to Jaguar Range Rover) and it being incremental, that would yield approximately 20,000 units per year.
  • Future unannounced diesel versions of CX-9, CX-3 and Mazda 6 could add at least another 10,000 units per year.
  • Mazda's financial plan calls for approximately 50,000 units in annual global sales increases for the next couple of years.
  • Mazda and General Motors look to fill the void in the sub-$45,000 diesel market vacated by Volkswagen and Audi in late 2015.

Mazda's (OTCPK:MZDAY) (MZDAD) U.S. sales have failed to increase materially on a net basis in 2017, despite the advent of outstanding new products such as the CX-9 and CX-5. On a global basis, unit sales increased by 1.6% for the year that ended in March 2017. Sales were 1.559 million units globally, up a modest 25,000 from the prior year. Tiny Tesla (NASDAQ:TSLA) was up 25,000 units from calendar year 2015 to 2016.

The automotive press is uniform in its praise for Mazda's industry leading exterior design as well as its driving dynamics. However, looking at the stock chart, you will see that the stock has been on a gentle downward trend since the second half of 2014, losing at least a third of its value.

When we look at Mazda's global operations and try to anticipate where things might go in the future, we notice two major things that stand out:

First, Mazda has no factories in the U.S. or Canada.

Mexico, yes. U.S. and Canada, no. Does this matter? It shouldn't and it might not. Yet it's noteworthy. If Mazda should ever feel the need to expand with a new factory in the U.S., perhaps the Nevada site currently owned by Faraday Future might be available. Or the one prepared by Lucid Motors in Arizona. Then again, Mazda could easily build one in a more traditional automotive location either in Texas or in the corridor between Indiana and Alabama.

Of course, that assumes that there is need for any new plant at all.

Second, Mazda sells no diesel vehicles in the U.S.

In Mazda's fiscal year 2017 (ending March 2017), 11% of its global unit sales were diesel. That's 167,000 out of the 1,559,000 global total. That doesn't sound all that dramatic, until you break out the numbers, first based on geography:

This article was written by

Anton Wahlman profile picture
6.97K Followers
I am a former sell-side analyst -- UBS 1996-2002, Needham 2002-2006 and ThinkEquity 2006-2008. These days I review automobiles and other technology products, as well as analyze the automotive and technology industries, and coming up with long/short ideas. I also continue to write (less frequently) on macroeconomics and politics.

Disclosure: I am/we are long GM, F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article for publication, the author was long GM, F and GOOGL. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.

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