Hiroshima - Mazda has only a tenth of Toyota's research and development budget, but is betting it can make the century-old internal combustion engine as fuel efficient as hybrids like its rival's pioneering Prius.

The gamble on developing petrol engines, while others move increasingly towards electric cars, could also show whether a small carmaker can survive independently in a high-stakes market for mass-produced passenger cars dominated by the likes of Toyota, General Motors and Volkswagen.

“People used to say there's no way a small carmaker could survive unless they find a partner because it wouldn't be possible to independently pursue costly technologies like fuel cells, electric vehicles and hybrids,” said Mitsuo Hitomi, Mazda's top powertrain engineer. “But these may not become mainstream.”

Mazda has chosen to focus on reducing the energy loss in combustion engines, with technology that is a side-show for bigger companies focused on headline-grabbing electric and hybrid vehicles. The move has already helped achieve big fuel-efficiency gains in Mazda vehicles.

Petrol engines now utilise at most around 35 percent of the fuel's energy, with the rest lost mainly to heat and friction. Engines also typically operate well below the peak, at around 20 percent efficiency.

Mazda wants to improve that to 50 percent at peak efficiency and maintain operation closer to peak levels. A first step would be with a breakthrough technology called HCCI, or homogenous charge compression ignition, Hitomi said.

Honda, GM and others have also been working on the technology for years, but it has yet to be mass-produced.

“ONLY OPTION”

In an HCCI engine, as in fuel-efficient diesel engines, the mix of air and fuel ignites without a spark plug, but carmakers have struggled to achieve ignition at low and high engine speeds. Mazda has solved that with a higher compression ratio, squeezing the air and fuel mixture further and boosting temperatures in the combustion chamber, Hitomi said.

One remaining problem, however, is a loud noise similar to engine knocking caused by overly intense combustion when the torque, or turning force exerted by the engine, is high.

Hitomi believes Mazda will be able to overcome this and hopes to have the HCCI engine ready to roll out around 2020, when strict fuel economy standards will likely be implemented in Europe.

“This is very hard and we wouldn't think of doing it if we had the number of people that would let us pursue all kinds of different technologies,” Hitomi said. “We are here because this is the only option we have.”

Hitomi said a car with an HCCI engine could have a fuel economy similar to petrol-electric hybrids. That could mean that a Mazda3 kitted out with an HCCI engine could run at about 30km per litre under Japanese standards, about a 50 percent increase from its current petrol engine, and roughly on par with a Toyota Prius.

CONFIDENCE BOOSTED

Mazda's annual vehicle sales, at around 1.2 million, are barely more than a single Toyota model, the world's best-selling Corolla, and many of its similarly-sized peers enjoy special advantages - BMW is an established luxury brand; Subaru is under the wing of Toyota, its biggest shareholder; and Mitsubishi is backed by the deep-pocketed Mitsubishi group.

Mazda, which made its first passenger car in 1960, lost the protection of Ford five years ago when the US carmaker, struggling to stay afloat, cut its holding to 13 percent from a more than one-third controlling minority stake it had held for nearly three decades. That stake has since dwindled to just 2.1 percent.

At the same time, Mazda was hit by a strong yen that battered the profitability of its exports. In the four years to March 2012, the company chalked up combined net losses of nearly 250 billion yen (R25 billion).

The company - which loaned part of its Hiroshima headquarters building to the local prefecture following the city's atomic bombing in 1945 - hunkered down with a strategy to boost fuel efficiency in its internal combustion engines, achieving gains of 15-20 percent since 2011.

Together with a series of other fuel efficient technologies it calls Skyactiv, a revamped manufacturing process and stylish new designs that it was able to roll out quickly in its relatively small product range, Mazda has boosted profit margins. On each CX-5 sport-utility vehicle loaded with Skyactiv technologies, Mazda makes $1500 (R15 000) more than it made on the CX-7, a sister model without Skyactiv. -Reuters