TOKYO/SHANGHAI (Reuters) - Mazda Motor Corp (7261.T) will begin production at its new Mexico factory in January, the carmaker's chief said on Wednesday, describing the plant as a key foreign base for the Japanese company as it pares its reliance on domestic output.
"I just visited the Mexican plant and all preparations are complete," Mazda's head, Masamichi Kogai said at a press conference at the Tokyo Motor Show. "This factory will become a crucial overseas base for Mazda," he added.
Selling just over a million cars a year and with most of its vehicles built in high-cost Japan, Mazda has struggled to compete with bigger automakers that are 10 times its size. In the four years to March 2012, the company chalked up combined net losses of nearly 250 billion yen ($2.5 billion).
Since losing the backing of Ford Motor Co (F.N), which once owned a third of the Hiroshima-based company, Mazda has drawn closer to Toyota Motor Co (7203.T) winning access to its hybrid technology. Mazda will also build cars for Toyota at the Mexico plant.
Meanwhile, the company's China chief executive said Mazda had cut its 2013 China sales target by 7.5 percent to 185,000 vehicles due to tough competition from its rivals.
Mazda now aims to sell about the same number of vehicles as last year, said Nobuhiko Watabe.
"Competition is fierce and it's not just from the other Japanese carmakers," Watabe told Reuters and other reporters in Shanghai last week, adding pressure was also coming from other foreign models such as Ford Motor Co.'s (F.N) Focus.
"It's been a tough fight."
Most Japanese carmakers have only been making a tepid recovery since last year when sales were hammered by a flare up in anti-Japanese sentiment triggered by a territorial dispute between Tokyo and Beijing over tiny, uninhabited islands in the East China Sea.
"We had hoped to sell 200,000 units this year as the impact of the island dispute fades, but we're now looking at more or less around last year's level at 185,000," Watabe said at the small group interview.
During the first 10 months of the year, Mazda sold a total of 142,571 vehicles, down 9.5 percent from a year earlier. Watabe said the drop in sales this year was also due to a high base from last year when strong demand for the Mazda3 Xingcheng boosted sales in the first half of 2012.
Mazda was hoping to set a higher 2014 sales target compared with this year but had not yet finalized the figure, Watabe said.
"Our CX-5 has been received very well and with the localization in production of the ATENZA and Mazda3 planned for next year, we hoping to jump up from this year's level," he added.
China's auto market has rebounded strongly from last year, with sales volume rising over 13 percent during the January-October period compared with a year earlier.
Mazda recognizes the importance of capturing demand in lower-tier cities where the economy has been expanding quicker than in major coastal cities like Shanghai or Guangzhou, but needs to be careful in its strategy, Watabe said.
"As growth slows in major cities, we need to shift inland. But cost efficiency in these areas are much lower because the population is dispersed," he added.
Reporting by Tim Kelly in Tokyo and Kazunori Takada in Shanghai; Editing by Jeremy Laurence