The next-generation Mazda 2 is crucial to the Japanese carmaker's ambitious plan to boost its sales in greater European from 300,000 to as much as 500,000 by 2010, reports Automotive News Europe.

Mazda expects the new-generation model to generate 80,000 additional annual sales in Europe, including Russia, when it is introduced in 2007 or 2008, Mazda Europe CEO James Muir said at a press briefing.

The carmaker sells about 20,000 2s a year, but Mazda hopes to reach 100,000 units by offering a range of models from the small car's platform.

Ford currently builds 2 for Mazda in Spain - 18,500 units in the first half. But both Ford and Mazda have said the model's replacement will not be built there because Ford needs the capacity.

A plan to sell 100,000 2s in greater Europe suggests Mazda might build the car and its planned derivatives in Europe. But a financial industry source said Mazda has decided to build the vehicle only in Japan because of favourable euro-yen exchange rates.

When asked where the 2 will be produced he said: "This issue still has to be evaluated. But Europe is one option."
China and Thailand also have been mentioned.

Mazda has been expected to take the lead on developing the small car platform for itself and the next Fiesta for parent Ford. But Muir said only that, "we could also become leader in Ford's next compact-car architecture. A decision on this issue will be taken soon."

The decision may have been affected by Ford's decision to jointly develop the Ford Ka minicar's replacement with Fiat. The current Ka is based on a shortened version of the Fiesta platform.

Muir did confirm that Mazda "will lead in four-cylinder engine development and manufacturing processes" for the small car programme. The new vehicle will be patterned after the Sassou concept, which debuted last week at the IAA in Frankfurt.

In 2007, Mazda will add a crossover called the CX7 positioned between small and large SUVs, Muir said. It will be a production version of the Mazda crossover concept shown at the Detroit auto show in January.

"Russia will be the leading market for this crossover vehicle," he said.

Mazda's product drive is part of its second five-year plan for Europe. The first, the Millennium plan, was to reverse a European sales slide from 300,000-plus sales in 1999 to 163,000 in 2001.

That plan restored Mazda's volume in greater Europe to 300,000, Muir said. The new plan is aimed at expanding the brand's line-up and boosting its sales. European volume in the first eight months this year fell 9.4% to 161,323 units compared with last year because of model changeovers and a fire at a Japanese plant that builds the RX-8 and MX5, he said.

But Muir expects to match last year's volume this year by boosting second half results.

The Japanese automaker also expects an immediate boost from Russia.

"It is our fastest growing market," Muir said. "We have seen our Russian sales go from 1,500 in 2003 to 20,000 for the current fiscal year. That gives us a 4.5 to 5% share of the foreign car market there."