This paper describes modularization of automotive parts by Mazda Co. and analyzes challenges of its local suppliers in Hiroshima region, Japan. Modularity has multiple aspects: modularity in design (MID), modularity in production (MIP), and modularity in organization (MIO), and each has its own logic. At Mazda MIP is the major force that configures modularization of parts, while either MID or MIO remain marginal. The research shows that product architecture of modules that local suppliers produce has yet achieved modularity in design. Modularization efforts by Mazda and its local suppliers include reduction of parts count, work steps, and/or improvement of ergonomics at assembly lines through integrating functions and components of modules. Furthermore Mazda has reinforced inter-firm relations with the local suppliers by integrating them at earlier stage of parts development. In order to deal with modularization of automotive parts, the study suggests that local suppliers should acquire system knowledge of modules, develop production technologies that functionally and structurally integrate components, improve logistic systems of assembled modules, and develop organizational capabilities to coordinate interfaces of product design and tasks across organizations.