Mazda 8's rolling off line intensifies FAW-Changan conflict

The strife between First Automobile Works (FAW) and Changan Auto Company has intensified as Mazda 8, FAW's first multiple purpose vehicle (MPV) officially comes off the production line.

Just three months ago, the two companies started competing for the car's manufacturing rights. And whoever won would have the privilege of occupying the Chinese domestic MPV market.

On September 27, the mayor and secretary of Changchun Municipal Party Committee, as well as leaders from FAW got together at FAW's First Factory, anticipating as FAW's first MPV came out of production line.

An employee with FAW-Mazda said proudly that in order to fill the vacancy in FAW's MPV market and also diversify its products, the company has been fasting for four years for Mazda 8's production rights.

An insider with the Changan-Mazda said that Changan Auto unexpectedly failed in its fist-twist with Faw. Changan-Mazda sold 66,800 units in the first 10 months, up 22.8 percent from last year but lower than the average increase of 37 percent, making it difficult to realize the company's selling target of 100,000 units for 2010.

The company which has been longing for expanding in the high-end market was hoping to vitalize its market by introducing new products.

Mazda 5, the next target?

As FAW and Changan Auto are in desperate need for new products for expansion, the competition between the two shows no sign of truce. And guesses are cast that their next round will befall on the Mazda 5.

Mazda 5, a family compact MPV, has been sold as an imported vehicle in China for two years.

Yu Hongjiang, deputy manager of FAW-Mazda said that the manufacturing of Mazda 5 in China is still away from reality, since the prospect of family compact vehicles in China falls behind that of MPVs.

As to rumors that Changan-Mazda will sell the model via imports, then later on localize it domestically, He Gang, market manager of Changan-Ford Mazda Sales Company told a reporter that the 2011 Mazda 5 will make its debut at the 2010 Guangzhou Auto Show, and that details will be due at the time.

It is not rare case for Mazda to cooperate with FAW in the high-end automobile market, and with Changan Auto in the economic auto market. Therefore, the likelihood of Mazda 5 falling onto Changanese hands is high.

"To produce the Mazda 5 in Nanjing is geologically and economically good for both Changan and Mazda's development," an insider with Changan-Mazda said.

However, as a two-year-old distributor of Mazda 5, FAW will try its best to joust for the manufacturing rights of the model.

Joint Venture, the match point?

Industry insiders believe that the competition of products between FAW-Mazda and Changan-Mazda is actually a direct combat between FAW and Changan Auto.

"Whoever grasps the lead of new products will occupy the market," an insider said.

As US Ford reduced its market share in Mazda to 3.5 percent, the company is free to form two joint ventures in China.

According to Noriaki Yamada, executive director of Mazda, the company has made a five-year plan to sell 1,7 million units by 2015; 400,000 of which will be sold in China -25 percent of Mazda's global market share.

Yamada said the company will enrich the variety of its products to meet Chinese customers' needs and create more opportunities to cooperate with Chinese companies.

Faced with the chance, both FAW and Changan Auto are trying to establish joint ventures with Mazda.

It is reported that Changan Auto and Mazda are presently awaiting for necessary approval from the National Development and Reform Commission, Ministry of Commerce of China and State Administration for Industry and Commerce of China for the establishment of a joint venture.

Meanwhile, rumor has it that FAW is also considering to found a joint venture with Mazda, however Zhang refused to comment on the issue, saying that as long as the two companies can realize a win-win situation, the cooperation mode could be flexible.

Ye Sheng, deputy director of auto research center Ipsos, said that if Changan Auto sets up a joint venture with Mazda ahead of FAW, Changan will have more advantages in introducing new models.

Since Mazda only has 4 percent of FAW's market share, FAW's profits and control will decline if the market share of the joint venture is divided in half.