Price Wars Drive Mitsubishi Motors Out of China to Move to Southeast Asia

• 24 October 2023
• Construction Focus
• 1020 Views

In a strategic move, Mitsubishi Motors has taken the decision to cease automobile production in China. This significant shift in strategy comes as Mitsubishi grapples with sluggish sales in China, primarily attributed to the increasing popularity of electric vehicles (EVs) and the emergence of local automotive brands.

As the curtains close on their Chinese operations, Mitsubishi Motors is poised to redirect its resources towards the dynamic markets of Southeast Asia (including Cambodia as a potential candidate) and Oceania. These regions collectively contribute to approximately one-third of Mitsubishi’s consolidated sales, as reported by Asia Nikkei on 27 September 2023.

The transition isn’t without complexities, as Mitsubishi engages in final withdrawal discussions with China’s automotive heavyweight, Guangzhou Automobile Group (GAC). This joint venture has been instrumental in Mitsubishi’s presence in China. However, the struggles Japanese automakers face in the wake of EV proliferation are prompting potential reevaluations of their strategies within the Chinese market.

A pivotal turning point has been the remarkable growth in EV sales, which soared by 80% in 2022, accounting for approximately 20% of all new car sales in China, as per data from the China Association of Automobile Manufacturers. Without proprietary EV technology, Mitsubishi sourced these vehicles through its partnership with GAC, leaving it vulnerable in a rapidly evolving market.

The company’s factory in Hunan province, operated under GAC Mitsubishi Motors, has already ceased production since March and will not resume operations. This facility was Mitsubishi’s sole manufacturing base in China.

Mitsubishi’s sales in China experienced a significant setback in 2022, with figures plummeting by approximately 60% compared to the previous year. In an effort to reverse this trend, Mitsubishi introduced a hybrid model, the Outlander SUV, tailored for the Chinese market. Unfortunately, sales fell short of initial expectations.

Makoto Uchida, President and CEO of Nissan Motor, expressed concerns about market conditions, emphasizing, “We are not at a level where we can make a profit due to extremely heavy discounting.” He added that the company was contemplating various options, including the reconsideration of their joint ventures in China.

Looking ahead, GAC is anticipated to repurpose the Hunan plant for EV production, striving to maintain a level of employment. Currently, GAC holds a 50% stake in GAC Mitsubishi, with Mitsubishi Motors owning 30% and Mitsubishi Corp. holding 20%. While GAC Mitsubishi will continue as a corporate entity, Mitsubishi Motors and Mitsubishi Corp. will divest their investments.

This strategic maneuver by Mitsubishi Motors underscores the dynamic shifts underway in the global automotive industry, as automakers adapt to the evolving landscape of EVs and emerging markets.

• Business and Market