Mazda Motor Corporation

The Mazda Group sells products in various regions worldwide, including Japan, North America, Europe, and Asia, and is strongly affected by economic slowdowns and recessions, changes in demand structure, and intensifying price competition in each market. If demand declines or price competition intensifies in major markets, both sales and profitability may be adversely affected. Although risk is diversified through the global dispersion of sales regions, resilience to scenarios in which multiple markets deteriorate simultaneously is limited.

In the automotive market, the industry structure is changing rapidly due to advances in connectivity, autonomous driving, and electrification technologies, and new entrants from other industries are also emerging one after another. If the competitive environment changes at a speed exceeding expectations, or if there are delays in responding to electrification regulations or failures to introduce attractive products in a timely manner, there is a risk of decline in sales share and product prices. The Group is working to strengthen its competitiveness across the entire range of product planning, development, manufacturing, and sales, but if it cannot respond to rapid diversification, there is a possibility of a material adverse effect on business performance.

Procurement of raw materials and parts depends on multiple suppliers, and it may become difficult to secure the necessary quantities due to disasters, geopolitical risks, supply-demand tightness, or logistics function deterioration. With the progress of electrification, timely procurement of battery-related parts and materials for electrified vehicles has become a new challenge, and insufficient procurement quality also poses a risk of worsening production. The Group is working to strengthen the resilience of the entire supply chain, but if these risks materialize, there is a possibility of significant disruption to production and sales activities.

Due to global business operations including exports from Japan to various regions worldwide and exports from overseas plants, transactions occur in various currencies, and exchange rate fluctuations directly affect business performance and financial position. The translation of overseas local currency-denominated assets and liabilities into yen may also adversely affect equity through foreign currency translation adjustments. The Group hedges risk through forward exchange contracts, but depending on exchange rate movements, opportunity losses may occur.

Against the backdrop of heightened geopolitical risks such as instability in the Middle East, semiconductor supply-demand tightness, and environmental regulations, raw material prices, logistics costs, energy prices, and labor costs are rising, potentially increasing costs for the Group and its suppliers. The Group is implementing cost containment measures such as productivity improvements and review of procurement conditions, but these alone may not be sufficient to absorb the cost increases, and depending on the competitive market environment, passing on costs to product prices may also be difficult. If cost increases cannot be absorbed or passed on, this will adversely affect business performance and financial position.

The Group is subject to environmental regulations regarding fuel efficiency, exhaust gas, safety, and pollutant emissions in each country where it operates, and demands for carbon neutrality in particular are rapidly increasing worldwide. The Group is responding through CO2 reduction from an LCA perspective and multi-solution electrification, but further tightening of policies and legal regulations in Europe, the US, and elsewhere may increase costs and adversely affect business performance and financial position. Delays in regulatory compliance or increased compliance costs also pose a risk directly linked to a decline in competitiveness.

The Group depends on information technology, networks, and systems across the entirety of its business activities, including product development, production, and sales, and the risk of increasingly sophisticated and elaborate cyberattacks such as ransomware attacks and targeted attacks, as well as unauthorized access through the supply chain, is increasing. There is also a risk of information leakage and unintended dissemination of information as the use of new technologies such as AI expands, and if such risks materialize, there is a possibility of significant impact, including business suspension, data loss, leakage of confidential information, degradation of product functionality, and damage to brand image. Costs incurred for countermeasures may also adversely affect business performance.

Due to the increasing complexity of new technologies, systems, and software associated with electrification and other developments, product defects may arise from unpredictable causes, creating a risk of large-scale recalls. In particular, when the Group is responsible for addressing such issues, this may lead to substantial costs, decline in brand image, and loss of market confidence. The Group is making its best efforts toward quality improvement and ensuring product safety, but the risk is increasing as technology becomes more complex.

In business operations in overseas markets, including the US, Europe, developing markets, and emerging markets, there are inherent various risks such as adverse political and economic factors, import/export regulations including tariffs, changes in laws and regulations, social disruption due to terrorism, war, or infectious diseases, and logistics tightness. If these risks materialize, there is a possibility of significant disruption to the continuation and expansion of overseas business, adversely affecting business performance and financial position. Against the backdrop of heightened geopolitical risk, the risk of import/export regulations and impacts on the supply chain materializing is increasing in particular.

Intensifying competition for highly specialized talent needed to respond to CASE and carbon neutrality, along with increased turnover due to greater workforce mobility, may make it difficult to secure human resources as planned. If the promotion of diversity, talent development, and improvement of workplace culture do not proceed as planned, the Group's 'people' may not be able to fully perform, posing a risk to medium- to long-term management and business activities. The Group is promoting active recruitment, strengthened development, and the establishment of systems and environments that enable autonomous work, but there is a possibility that its response may not keep pace with the intensifying competitive environment.