Japanese Carmakers Scrap Signature Models to Reach Zero Carbon Goals

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There is a growing trend among carmakers to discontinue what were once their signature models, and shift to electric vehicles (EV) and other next-generation transportation. In other words, they are moving to keep up with the trend toward carbon-neutrality. 

Honda has decided to end production of the Odyssey, which set off the minivan boom in the 1990s, by the end of 2021. Mazda is also withdrawing its midsize sedan Mazda6 and SUV CX-3 from the American market. Here’s what’s happening, and why.

Honda Steps Back

In addition to the Odyssey, the luxury sedan Legend and the midsize sedan Clarity will be discontinued by Honda. These models are produced at the company’s Sayama plant, in Saitama Prefecture, which will shut down by the end of FY2021.

In his inaugural press conference in April 2021, Honda CEO Toshihiro Sanbe said: “Our strategy is not based on volume. It’s more important to provide quality products. We will set targets, but won’t adopt an expansion strategy.”

A failed expansion policy promoted by former CEO Takanobu Ito caused profit margins to stagnate in Honda's four-wheeled vehicles, with had an operating margin of only 1.0% in the fiscal year ending in March 2021, compared to 12.6% in Honda’s motorcycle business and a sharp contrast to Toyota’s 8.1%. 

Since the days of former CEO Takahiro Hachigo, Honda has focused on improving production efficiency and optimizing production capacity to shake up its four-wheel vehicle business. In addition to plant closures, the company has also taken steps to terminate the production of unprofitable models.

The first-generation Odyssey was launched in October 1994. It became popular among families for its spacious six- to seven-passenger cabin and a comfortable driving experience reminiscent of a sedan, selling approximately 125,000 units in 1995.

However, sales gradually slumped due to the emergence of minivans and minicars from competitors. According to the Japan Automobile Dealers Association, only 9,717 Odysseys were sold in 2020, coming in at 47th among registered cars.

The Honda Legend drew interest for its Level 3 self-driving features, which could take over the vehicle in traffic jams on highways. But it is only available for lease, and production will be limited to a batch of 100 vehicles.

The model Clarity Fuel Cell is Honda's only fuel cell vehicle (FCV). It was launched in 2016, but cumulative global sales have remained at about 1,900 units due to a dearth of hydrogen stations and other challenges. Ending production of the Clarity Fuel Cell will be a step back from its goal of going 100% electric by 2040. 

In the quest for developing models with advanced self-driving features, Honda will continue researching and developing FCVs in cooperation with General Motors (GM) of the United States.

Mazda’s Changing Customer Preferences

In May, Mazda North American Operations announced that it would not be selling the Mazda6 sedan and CX-3 for the 2022 model year in the U.S. Considering that the United States is an important market for Mazda, the decision couldn’t have been an easy one.

Despite the drop in demand due to the coronavirus pandemic, sales in the U.S. market increased by 0.2% year-on-year to 279,076 units in 2020, with SUVs being the driving force. The CX-5 (146,420 units) accounted for more than half of the sales, with the newly launched CX-30 (38,064 units) also chipping in.

In contrast, Mazda6 saw sluggish sales, down 24.7% to 16,204 units, while the CX-3 was down by almost half to 8,335 units, falling far behind other SUVs.

Mazda North American Operations said that they were “proud” of both models for “their contribution to the brand in performance, design, quality, and safety,” and explained that the reason for their discontinuation was "changing customer preferences.”

Mazda plans to increase its sales in the United States to 450,000 units by the fiscal year ending March 2026. 

The electrification of vehicles has become more urgent with the emergence of the Biden administration and its push for carbon neutrality. In line with this pressure, Mazda will be launching an EV model of the MX-30 SUV in the fall of 2021 in California.

Between 2022 and 2025, Mazda plans to launch three EV models, five hybrid vehicles (HV), and five plug-in hybrid vehicles (PHV) in Japan, the United States, Europe, China, and Southeast Asia. Moreover, it aims to incorporate electrification in all vehicles produced by 2030, with an EV ratio of 25%.

The trend of eliminating models in response to the rapid electrification in the automobile industry is expected to continue, and even the flagship models of auto companies won’t be spared. 

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(Find access to The Sankei Shimbun report in Japanese at this link.)

Author: Takafumi Uno