[Akira Marumoto, President and Chief Executive Officer]
[Kiyoshi Fujiwara, Executive Vice President]

(Marumoto)
Good afternoon, everyone.

I'm Akira Marumoto, Representative Director, President and CEO of Mazda Motor Corporation.

Thank you for taking the time to join us today at the Mazda Technology Briefing 2018.

Before I begin, on behalf of everyone with Mazda, I would like to extend our deepest sympathy to all those who were affected by a series of natural disasters that hit different parts of Japan this summer.

Hiroshima was no exception. Mazda's hometown was severely affected by the record rainfalls in July.

As a car company founded and based in Hiroshima, we've taken actions to help those in need and speed up recovery. We've dispatched employees as volunteers, provided vehicles, and supplied goods and materials to affected suppliers.

To our stakeholders, I would like to apologize again for the concern we caused with the improper handling of test data in final vehicle inspections. We take this issue seriously and are committed to taking all necessary actions and measures to ensure it never happens again.

Now let's move on to the main topic of today's briefing.
Last year, Mazda announced “Sustainable Zoom-Zoom 2030,” our long-term vision for technology development leading up to the year 2030.

As the first concrete steps demonstrating our commitment to delivering on this vision, we announced the SKYACTIV-X next-generation gasoline engine along with our next-generation vehicle architecture, which we call SKYACTIV-Vehicle Architecture. We've invited many media and journalists from key regions to test drive prototypes featuring those new technologies.

Our next-generation design vision model, Mazda VISION COUPE, was unveiled at the Tokyo Motor Show last year to demonstrate how we are elevating KODO design to the next level. We continue to explore the essence of Japanese aesthetics and pursue a uniquely elegant and sophisticated style.

These actions demonstrate that we are on track with the roadmap shown in this slide.

While keeping an eye on the changes that are occurring almost daily in the automotive industry, Mazda will continue to push forward with our strategy.

We are witnessing an emergence of new auto technologies such as CASE – Connected, Autonomous, Shared and Electric – that are making steady advances and opening the door for new players to enter the auto industry.

To us, the spread of these new technologies and services will enable more efficient, safe and unrestricted mobility, potentially bringing new value to automobiles and to society.

Over the last 12 months, we have seen drastic changes in auto-related environmental policies and regulations all over the world.

The U.K. and France have made clear their intention to ban sales of passenger cars powered solely by internal combustion engines.

In China, the government is enacting New Energy Vehicle policies from 2019.

In the U.S., some states like California have introduced Zero Emission Vehicle programs, but recently there have been new moves to revisit the regulations.

Here in Japan, the Strategic Commission for the New Era of Automobiles, an initiative driven by the Ministry of Economy, Trade and Industry just recently released the long-term goals to be achieved by 2050.

The report stated that, from a well-to-wheel perspective, cars manufactured and sold in the global market by Japanese car companies must deliver world-leading environmental performance by the end of 2050 and that the car companies must aim to reduce greenhouse gases emitted by passenger cars by 90 percent. Furthermore, car companies are expected to pursue innovation in how cars are used and strive to achieve zero emissions in global energy supply.

Keeping all of this in mind, I want to talk about our vision for the Mazda brand and the unique value we want to continue to offer our customers in the future. I will also explain how we plan to achieve our vision through Mazda-unique electrification technologies and our connectivity concepts.

Mazda wants to be a brand that enjoys a powerful, everlasting connection with our customers. A brand that our customers trust, a brand that's essential to their lives. And we believe that pursuing and refining values that are unique to Mazda is the key to success.

The automotive industry is said to be going through a once-in-a-century seismic shift.

Yet Mazda still believes in a simple yet powerful idea of the car as a source of excitement and inspiration. We are firmly committed to the joy of driving and will continue to deliver the brilliance of life through our products and services. It is this spirit that drives us to make our emotional connection with customers stronger and deeper.

When we talk about driving joy, we don't mean the adrenalin rush that runs through your body on a roller coaster ride with abrupt accelerations or g-forces.

It is a product of the car's fundamental abilities to drive, turn and stop in common driving situations – on your daily commute, going to the store and on longer trips with your family. A Mazda feels like a tool you've been using for years. You relish the interaction and the pleasure it brings makes you want to keep on driving.

And because it's engineered to match people's sensitivities, the car's movements feel natural to passengers, who can enjoy the ride in comfort and peace of mind.

The same car should captivate people the moment they see it, and the way its expression changes in different environments and lighting means you never tire of looking at it.

Owning such a car gives drivers a deep sense of fulfillment and a desire to keep on driving whenever and wherever. That's how we define the joy of driving.

It is this driving joy that runs at the base of our challenges to solving issues faced by the earth, society and people. “Sustainable Zoom-Zoom 2030” is the roadmap and vision that lays out those challenges.

In light of the drastic changes taking place in the industry, allow me to give all of you an update on the progress we've been making.

Firstly, the earth. Our greatest challenge lies in reducing carbon dioxide emissions to curb global warming.

I'm sure all of you are feeling the impact of climate change, including the record-breaking heat wave this summer and other natural disasters taking place around the world, which are said to be caused by the global warming.

As a car company, Mazda feels a great responsibility to reduce emissions of carbon dioxide, which is a key cause of global warming, to preserve this beautiful earth for future generations.

To that end, Mazda is embracing a well-to-wheel approach and working to reduce carbon dioxide emissions throughout car's entire life cycle.

We are aiming to reduce our corporate average carbon dioxide emissions to 50 percent of 2010 levels by 2030, with a view to achieving a 90 percent reduction by 2050.

Our approach and our targets are perfectly aligned with the Paris Agreement and the Strategic Commission for the New Era of Automobiles set up by Japan's Ministry of Economy, Trade and Industry. We are committed to further accelerating our efforts to achieve these targets.

As automotive power source fitness, energy situations and energy mixes vary from country to country, a multi-solution approach is needed to implement the right solution to the right region.

Third-party agencies project that even in the year 2030, many cars will still be powered by internal combustion engines in combination with electrification devices.

By 2030, Mazda plans to have introduced electrification technologies to all the cars we make.

According to our estimates, 95 percent of the cars we produce will be hybrids, plug-in hybrids or the like, and will still feature an internal combustion engine. The remaining 5 percent will be pure electric drive. As such, there will be no change to our strategy of working to perfect the internal combustion engine.

Based on that strategy, we announced our next-generation gasoline engine, SKYACTIV-X, last year.

This engine represents the second step in our three-step roadmap to create the ideal internal combustion engine. As we head toward 2030, we will be working on heat insulation, which is our current technical roadblock, to make further improvements.

Apart from perfecting the internal combustion engine, ongoing efforts to be as carbon-neutral as possible with energy sources is essential to hitting our well-to-wheel carbon dioxide reduction targets for 2050.

The automotive industry is expecting a wider penetration of recyclable liquid fuels, such as biofuels made from microalgae. To help spread these alternative fuels and solve relevant technical issues, Mazda is taking part in a collaboration between industry, academia and government.

Activities such as these are recognized and supported by the Strategic Commission for the New Era of Automobiles mentioned earlier. We are continuing the collaboration as well as partnerships with commercial businesses to drive and accelerate open innovation.

For regions that generate a high ratio of electricity from clean energy sources and those that restrict certain vehicle types to reduce air pollution, EVs and other electric drive technologies are undoubtedly the optimal solution.

Many car companies are offering EVs that cater to government policies and tightened regulations in different countries and regions. Mazda, as always, dares to be different. We will exploit the advantages of electric drive systems and combine them with Mazda's proprietary technologies to produce EVs that fully deliver the joy of driving.

One of our solutions is a range-extender powered by Mazda's unique rotary engine.

Our EV will realize the unique value of the car – allowing the driver to go wherever they want, whenever they want - by taking full advantage of the rotary engine's benefits and using it as a power generation system. Kiyoshi Fujiwara, our Representative Director and Executive Vice President, will give you more details on this subject later on.

Secondly, society.

We are witnessing new causes of car accidents, mainly in developed countries.
Shifts in social structures have increased the number of people who do not have access to unrestricted mobility.

To address those issues, Mazda is aggressively promoting initiatives to create a safe and secure car society and a system that enables people to enjoy free mobility and richer lives.

In our effort to create such a car society, Mazda is, of course, committed to improving our advanced safety technologies and making more of these features standard in all cars. On top of that, we are aiming to make the Mazda Co-pilot Concept, which uses autonomous driving technologies, standard by 2025.

We will also be leveraging connectivity technologies to help fulfill the mobility needs of those who have difficulty driving or live in sparsely populated areas.

Again, Fujiwara-san will give an overview of this in his presentation later.

Last but not least, people.

All of us today are enjoying the benefits of economic affluence brought by industrialization and automation. Yet, an increasingly sedentary lifestyle and fewer opportunities for face-to-face interaction seem to be adding to the stress of daily life.

In such a stressful world, we want many people to experience Mazda's joy of driving experience the elation and fulfillment it brings.

To that end, we will be fine-tuning our strengths. Namely, the Jinba-ittai feeling of being one with the car that unlocks people's potential and energizes them physically and mentally, and our designs that enrich the emotional lives of all who see our cars.

The time has come to introduce my colleague Kiyoshi Fujiwara, Mazda's Representative Director and Executive Vice President. He will take you through Mazda's EV technologies and connectivity.

Fujiwara-san, over to you.

(Fujiwara)
Hello everyone, I'm Kiyoshi Fujiwara with Mazda Motor Corporation.

As Marumoto-san mentioned earlier, Mazda sees the trend toward Connected, Autonomous, Shared and Electric, or CASE, as offering not only potential solutions to issues facing the earth and society but as a chance to make the automobile even more attractive to customers.

As usual, we are taking a unique, human-centered approach to CASE to create and deliver a lifestyle with cars and a new car culture that will truly enrich the lives of our customers.

I'd like to talk about our upcoming battery EVs and connectivity technologies, both of which feature unique characteristics true to Mazda's ideals.

Let's begin with the battery EVs. Mazda is developing its own EVs, entirely in-house, targeting market introduction around 2020.

We are also moving forward with the development of fundamental EV technologies through EV C.A. Spirit Corporation, aiming to finish the technology development phase by around 2020. It's up to each participating company how these fundamental technologies will be turned into consumer products, and Mazda has not yet decided on any specific commercialization plans.

Today, I will talk about the battery EVs we are developing in-house.

Mazda is not about to change the way we make cars, just because we are dealing with battery-powered EVs.
Regardless of the era or the type of car, the philosophy behind all Mazda cars is to stay true to our higher cause. In other words, our cars and technologies must contribute to the earth and society, and they must be human-centered.

We are committed to making cars that invigorate the mind and body and offering customers an enriching experience of car ownership. And our battery-powered EVs will be no exception.

There are three concepts that lie at the heart of our EVs. Firstly, the joy of driving. Secondly, earth- and people-friendly technologies. And thirdly, technologies that contribute to society.

As you'd expect of Mazda, driving joy comes before all else, even with our EV.

We define driving joy as the feelings and sensations felt when driving a car that accelerates, turns and brakes in a way that feels just right, like a tool you've been using for years. The interaction and the pleasure it brings makes you want to keep on driving forever. The car should be engineered to move in a way that conforms to the natural movements of human beings, so its motion feels natural to passengers, and the comfort and security they feel mean they want to keep going too. The design captivates you from the moment you lay eyes on it, and you never tire of looking at the car because its expression changes with the light and the surrounding environment. And that makes you want to drive again. Owning, driving and spending time with the car offers a truly satisfying experience.

That is what Mazda means by driving joy.

It's not about sheer power and speed. It's not about being the fastest to 60 mph or the fastest to 100 kph.

We want to offer a kind of driving joy that you can feel every day, every time you drive. And we are committed to realizing a feeling of unity between car and driver with our battery EVs as well.

One way we deliver driving joy with our battery EVs is through our unique G-Vectoring Control technologies.

For cars powered by an internal combustion engine, GVC controls vehicle behavior with a braking force attained by reducing engine torque slightly when pressing the accelerator. In an EV, the technology can also control the regenerative brake when the accelerator is not being pressed, allowing for control of vehicle behavior whether the driver is pressing the accelerator or not.

If the EV drives down a hill, for example, GVC provides seamless and precise control.

Our EVs will also receive GVC Plus, which will be announced soon. This advanced GVC technology will ensure even smoother linkage of the vehicle's lateral and longitudinal motion, making possible the kind of motion I spoke about earlier, which conforms to the natural movements of human beings.

We believe this will allow us to achieve the Jinba-ittai driving feel that makes people feel one with the car.

In other words, our battery EV will offer the same kind of driving joy as any other Mazda.

The second concept is earth and people-friendly technologies.

When driving a battery EV, there is always that fear of running the battery flat. Other concerns include where to find a charging station, and how long will it take to charge the battery. How much driving range would liberate drivers from such anxieties? Nobody knows. But it seems reasonable to assume that if charging stations were as common as gasoline stations today and charging took no longer than filling up the tank, EV drivers would probably be happy with the cruising range of modern combustion engine-powered cars. At this point in time, that is simply not realistic.

To resolve some of these concerns, our idea is to give EV drivers the option of using the existing energy infrastructure in a pinch. In other words, they can put some gas in the tank and get back on the road. We see a range extender that uses an engine to generate electricity as a people-friendly technology that removes much of the anxiety of driving an EV.

I'd like to talk about some of the unique characteristics of our rotary engine-powered range extender.

Firstly, it's compact and lightweight. Because a rotary engine generates power through the revolving motion of the rotor, it can be integrated with an electric motor, which has a similar rotational structure, to create a very compact unit. Compared to a reciprocating engine, it's very space-effective, and the unit's compact size means more flexibility and freedom in designing the motor room layout.

The second characteristic is the low vibration and noise unique to rotary engines. The design of a rotary engine means it produces much lower vibrations than a reciprocating engine. As the table at right illustrates, the rotary-powered range extender outputting 10kW is quieter than an equivalent reciprocating engine unit in the low-frequency range and the mid- to high-frequency range, in terms of in-car engine noise. This means that even when running, the range extender won't encroach on the quiet and comfortable atmosphere for which battery-powered electric vehicles are well known.

Those are the key advantages of a range-extender powered by a rotary engine.

Now I will explain how we will leverage the high output and small size of the rotary engine to create multiple xEVs.

Using the rotary-powered range extender as a base together with different combinations of generators, batteries and fuel tanks enables us to offer plug-in, series and other kinds of hybrids – in other words, multiple xEVs – using the same vehicle packaging.

The degree to which adding electrification to vehicles helps reduce well-to-wheel carbon dioxide emissions depends on the energy mix in each region.

There are regions that produce most of their electricity via clean energy sources and a battery EV would be environmentally friendly, but the country's size and lack of charging infrastructure make a range extender the best choice. In countries that rely heavily on thermal plants for power generation, plug-in hybrids and series hybrids can be said be more advantageous in terms of reducing carbon dioxide emissions on a well-to-wheel basis.

As the degree of carbon dioxide reduction and the penetration of charging infrastructure varies from region to region, a technology that enables multiple xEV iterations of a single model could be a huge advantage.

Furthermore, as people work to reduce carbon dioxide emissions, fuel types are likely to diversify in the future, with different options available in different regions.

Since our rotary engine is compatible with a diversity of fuel types, it can be adapted to alternative fuels such as compressed natural gas, liquefied petroleum gas and even hydrogen.

The third point is technologies that contribute to society.

In recent times, numerous natural disasters have disrupted our energy infrastructure and seriously affected people's lives.
Mazda is proposing a new way of helping people and contributing to society that uses the range extender's ability to generate electricity.

Electric vehicles with LPG-compatible range extenders could be used in disaster areas as mobile electricity supply vehicles. If, for example, a disaster causes power outages and a shortage of gasoline and diesel, the rotary-powered range extender could still supply electricity using widely-available and easy-to-transport LPG gas cylinders. Mazda hopes to create a new form of social contribution by sending such cars to disaster-affected areas and providing electricity to those in need.

An EV equipped with this Mazda-unique system is currently under development. We hope to invite you all to take a test drive sometime next year. Being a Mazda, it'll be an EV that delivers the joy of driving, so please look forward to it.

Now let's move on to Mazda's unique connectivity technologies.

Mazda is proposing two value concepts through our connectivity technologies.
The first, which all car companies want to offer, is simply the ability to enjoy smartphone-like digital convenience, safely, while in your car. The second is based on our human-centered development philosophy and is all about applying connectivity to provide an enriching lifestyle and experience of car ownership that energizes people physically and mentally. Our hope is to bring out both these values, and this underlying philosophy won't change with the times or the emergence of new communication devices.

In today's world, we are all connected and empowered by having access to the Internet.
New devices make gathering information, purchasing products and enjoying new experiences as simple as speaking a few words. No doubt about it, these are wonderful times.

Having said that, all this convenience may also be adding to our stress and fatigue. We feel we must constantly seek out the latest news and information so we don't fall behind the times. Some of us are beginning to realize that such behavior is robbing us of the ability to relax and enjoy spending time with family and friends.

After all, human beings are creatures that find joy in making connections with others through real-life interactions.

We believe that there are people out there who want to keep the benefits of convenience brought by digitalization, with the freedom to go offline and take a vacation. A desire to be temporarily released from overdependence on digital tools. A need for digital detox.

Again, Mazda wants to apply its human-centered approach to develop connectivity technologies that balance the convenience of a connected, digital society with real-world human interaction and connection.

Today, the digital world is where people go to meet others and discover new interests. The ability to test the waters before meeting someone in real life is a big advantage, and it creates the desire to go out, meet that person and spend time together.

At Mazda, we want to connect the benefits of digital tools with the power of the automobile to expand the scope of people's activities and make the journey itself something to be enjoyed. We think this fusion of the automobile and digital tools could help people reclaim and re-empower aspects of their humanity that were lost to digital overload by leading them back to real-world interactions with people and nature.

This is where people can help each other, meet in nature, talk face to face and recreate together in the real world, sharing feelings and experiences. Mazda feels that this is the world to which connectivity should lead.

Based on this, Mazda wants to propose a new value of the automobile that enables an emotionally enriching joy of life. This is a joy derived from making connections with people and with society as a whole by sharing the excitement and experiences one gains through the car's connectivity, a fusion of the automobile and digital tools. We want to use this new value of the automobile to inspire people and society.

Let me give you an example. Doing volunteer work and taking part in village renewal projects are common ways to get unplugged and experience a sense of fulfillment. People can drive their Mazda to depopulated areas and help others with limited options for getting around. While there, they may be inspired to take part in a village renewal project. I think people get great emotional fulfillment out of such experiences.

We envision a future where connectivity technologies will connect people and communities. The technologies will enable people to express their intention to take part in the project while driving and the car gives them independent mobility for action or even provides the means of making a contribution. They meet other project members and then use digital tools to expand those connections, and then expand them further through the unlimited connective potential of the digital society.

This is how we envision real-world activities that offer a digital detox combining with the power of the digital world to expand connections in a way that balances both. We think that this is what people want now, and we would very much like to make such a world possible. We hope that creating such experiences will allow people to fully celebrate the joy of life.

Apart from digital detox, we believe that our connectivity technologies, once spread, can be a means of solving issues in society. Recent years have witnessed the dilapidation of public transportation systems in depopulated areas, and this has made it harder for the elderly and disabled to get around. To help solve such issues in Japan and other developed countries, we feel that the car and connectivity technologies can support activities that each of us can take part in to make a difference.

Mobility by car is not only a way for people within a community to help one another; it can also help make local communities more open to diversity. More interaction between cities and depopulated areas may lead to human resource development and the creation of new industries.

As our first concrete step, Mazda will start testing a mobility service in Miyoshi, Hiroshima this month with an eye to ride-sharing services in the future. The initiative aims to improve the operational efficiency of a local mobility service operated by a non-profit organization, encourage participation and create added value to energize the local community.

We want our connectivity technologies to help create a community where locals help one another, assisted by drivers from inside and outside the community, and promote real-life discoveries, experiences and growth through human interactions. Surely that is the way to create a more human world that allows people to really experience the joy of life.

We are also working on technologies that connect customers to their car and technologies that connect customers to Mazda. To build a stronger customer relationship and connection for our business in the future, we'll be using connectivity technologies to drive business innovation. The connected car system that will form the basis of our connectivity, will be a part of our upcoming next-generation product lineup.

To ensure access to a broad range of accurate information, Mazda sees the development of the majority of onboard devices, communication platforms and IT systems as areas of cooperation, and we plan to make full use of our alliance with Toyota Motor Corporation.

Lastly, I'd like to discuss the value created by integrating xEVs with connectivity.

Today, very few of us would be willing to give up our personal connections via digital tools or access to electricity in our daily life. Despite our desire to unplug and take a digital detox, we also want the peace of mind of knowing that you can return to that world of convenience anywhere and at any time.

Combining connectivity technologies with the range-extender's ability to act as a power source provides the basic necessities of life – off-grid access to electricity and 24/7 communication capability – and combines them with the power of a car to expand the range of your activities.
Mazda believes that this combination can encourage people to get offline, enjoy new experiences in nature and the pleasure of using a car, and truly feel the joy of life.

Everything Mazda makes – EVs, connectivity technologies, even autonomous driving and car sharing, although we didn't get to those today – everything we make must be true to our development philosophy, which puts the human being at the center of everything we do. We will adapt to this new world and deliver the joy, not only of driving but – through our efforts to create a new car culture — the joy of life itself.

We envision people enjoying better health and well-being physically and mentally as the ability to share experiences and feelings enhances their overall level of emotional fulfillment.

More details of the technologies I spoke about today will be presented at a test drive event scheduled for next summer.

Until then, we appreciate your patience.

Thank you very much.

(Marumoto)
Thank you, Fujiwara-san.

Finally, I'd like to give a quick overview of Mazda's future product and technology development plans from a management perspective.

In addition to the electrification and connectivity technologies presented today, Mazda is making steady progress in autonomous driving, plug-in hybrid technologies and the further advancement of the internal combustion engine. It's all part of our commitment, based on our “Sustainable Zoom-Zoom 2030” vision for technology development, to help resolve some of the issues facing the earth, society and people.

One of the biggest challenges facing management is how to balance such broad-ranging product and technology development with business efficiency.

We will continue to advance Monotsukuri Innovation through Bundled Product Planning, the Common Architecture Concept and our flexible production system. At the same time, we will take model-based development techniques honed in the area of integrated control systems and apply them to electrification, the Mazda Co-pilot Concept, connectivity and more. This approach will allow us to improve quality and enhance development efficiency.

We will be working with alliance partners in areas in which we can cooperate and outsourcing when it makes strategic sense to do so.

As Fujiwara-san said in his presentation, we will work in cooperation with EV C.A. Spirit Corporation to develop fundamental EV technologies and with Toyota Motor Corporation on the development of connectivity technologies.

In our efforts to help make internal combustion engine-powered cars carbon-neutral, we continue to work on development and testing of recyclable liquid fuels through the Hiroshima Council for the Promotion of Collaboration between Government, Academia and the Automobile Industry (Hirojiren), and through joint research projects with the Tokyo Institute of Technology and Hiroshima University.

We are confident that, despite our relatively small size, initiatives such as these will help us respond to the need for multiple powertrain solutions while maintaining good business efficiency.

At the end of last month, we began mass production of the leadoff batter in our next-generation line-up, a model that incorporates some of the technologies we've spoken about today. We plan to unveil this all-new model at the Los Angeles Auto Show in late November.

This hugely important model is going to strengthen our brand and drive Mazda's future business growth. So, please stay tuned.

That concludes our presentation today.

Thank you very much.