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Mazda to release diesel hybrid based on CX-5 in 2020

Japanese automaker stakes future on internal-combustion engine and Toyota tie-up

Mazda plans to release in 2020 a diesel hybrid vehicle based on its CX-5 model. (Photo by Wataru Ito)

TOKYO -- Mazda Motor plans to release its first diesel-engine hybrid vehicle, beginning in Europe and Japan, in 2020, company sources said Wednesday. The Japanese automaker will also consider selling the car in the U.S.

The market for diesel-powered cars has soured in the wake of an emissions scandal at German automaker Volkswagen and tougher pollution regulations, raising eyebrows among industry analysts at Mazda's move.

Toyota Motor has decided to stop selling diesel-powered vehicles in Europe. Nissan Motor is also expected to suspend development of a diesel engine. Mazda believes it can buck this trend, foreseeing continued demand for diesel cars thanks to their good range and low fuel prices.

Mazda will start by rolling out a diesel hybrid based on its CX-5 crossover and later add more diesel hybrids, especially sport utility vehicles.

While the carmaker plans to release a gasoline-powered hybrid in fiscal 2018, it decided to include diesels in its hybrid strategy. The Hiroshima-based automaker will develop the diesel hybrid on its own, without assistance from tie-up partner Toyota.

The model will use a simple, low-cost system called a "mild hybrid." It will feature a 48-volt battery and a small motor that will give an extra boost during acceleration and other phases of driving.

Mazda says the new model, which combines the hybrid system with a new engine designed to be 10% more fuel efficient, will improve mileage of the hybrid by around 20% versus Mazda's current diesel engine, which is already considered the world's most efficient.

Despite the prospect of such improvements, diesel cars have run into resistance around the world, especially in Europe, their main market. The share of diesels of all cars sold in 18 Western European countries peaked at 56% in 2011. In the April to June quarter of this year that figure had fallen to 37%.

Governments in Western Europe are also strengthening emissions regulations. For example, Hamburg, Germany's second-largest city, banned certain older diesel cars from the road in May.

Tetsuya Fujimoto, Mazda's managing executive officer, said that the automaker is struggling in Europe because "the percentage of diesel cars in Europe has shrunk to 18%" of Mazda's sales. Fujimoto made the remarks at a news conference in August announcing the company's quarterly earnings.

Mazda has been under pressure to review its product line in Europe as the proportion of diesel cars sold in the region, which had been above 30% of the total before the Volkswagen emissions scandal broke, has since fallen by nearly half.

By 2030, demand for diesel-powered vehicles is forecast to fall by about 40% versus 2017 to 10.67 million cars, according to IHS Markit. On the other hand, sales of mild-hybrid vehicles are expected to balloon fiftyfold to 35 million cars, compared with just 9 million for electric cars.

Mild hybrid systems, along with more efficient diesel cars, are expected to serve a bridging technology until the worldwide fleet goes fully electric. These stopgap technologies offer a good balance of low environmental impact and high performance.

The auto industry is looking to incorporate connected-car and autonomous-driving technologies into its products. The battle to dominate these new technologies is creating a new rivalry between carmakers and information technology companies.

Another big change is where the demand is coming from. As sales slow in places like Europe and Japan, automakers are keen to expand in faster growing markets elsewhere.

These developments are forcing the big players to rethink their strategies. General Motors of the U.S., for example, has pulled the plug on money-losing operations in Europe and India, shifting its resources to places markets where its position is stronger.

Many smaller manufacturers are teaming up to survive. Only the biggest producers that sell at least 10 million cars a year, such as Toyota, the Nissan-Renault alliance and Volkswagen, are likely to make it on their own. Mazda, which sells around 1.6 million cars a year, must therefore focus its efforts -- and choose its friends -- carefully.

There are a number approaches to finding a comfortable niche. Volvo Car, owned by China's Geely, for example, is focusing on electric cars. Starting next year, the Sweden-based automaker's entire fleet will be electric. Suzuki Motor of Japan, on the other hand, has decided to withdraw from China production, the world's largest car market, preferring to focus on its stronghold in India.

Mazda's sales are much more widely dispersed. It has significant operations in North America, Europe, Japan and other parts of Asia. It will have to focus on specific technologies, rather than a particular region.

By pushing ahead with diesels, Mazda appears to be swimming against the tide. It could not have done so without its partnership with Toyota, which began in 2017.

Developing electric cars requires massive investment in many different components. By partnering with Toyota, Mazda is able to concentrate on honing its skills making internal-combustion engines. It can also tap into Toyota's extensive network of business partners.

In a fiercely competitive market dominated by larger rivals, Mazda in years past teamed up with Ford Motor of the U.S. Now it has thrown in its lot with Toyota. Even so, its decision to stay the course with diesel cars points to a willingness to do things its own way.

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