Struggling Mitsubishi to Exit Chinese Market: What Went Wrong?
In a surprising move that highlights the growing strength of China’s domestic car industry, Mitsubishi is reportedly pulling out of its production program in the country. While the news has yet to be officially confirmed by Mitsubishi, reports suggest that the automaker is in talks with China’s Guangzhou Automobile Group (GAC) about ending their joint venture in Hunan province, which is Mitsubishi’s only Chinese venture. This decision comes after a period of disappointing sales for Mitsubishi in China, with a 60 percent decline in sales in 2022 compared to the previous year. So, what led to Mitsubishi’s struggles in the Chinese market?
Challenging Sales Environment
One of the main reasons for Mitsubishi’s decline in China is the increasing competition from Chinese-branded vehicles. Over the years, Chinese automakers have made significant improvements in terms of design, quality, performance, and technology. As a result, local brands accounted for almost 51 percent of the 23.56 million vehicle sales in China last year, while Japanese automakers’ market share fell nearly 3 percent to 18.3 percent, according to research firm MarkLines. This shift in consumer preference towards Chinese brands has undoubtedly impacted Mitsubishi’s sales figures.
Lagging Behind in the EV Market
Another factor contributing to Mitsubishi’s struggles in China is its inability to keep pace with the rapid growth of the electric vehicle (EV) market. China has been at the forefront of the EV revolution, with the government providing significant support and incentives to promote EV adoption. Chinese automakers have capitalized on this opportunity and have been successful in meeting the growing demand for EVs. Unfortunately, Mitsubishi has failed to make a significant impact in the EV market, despite offering a couple of EV models. This has put them at a disadvantage compared to their Chinese counterparts.
GAC’s Plans for the Future
Interestingly, while Mitsubishi is exiting the Chinese market, GAC plans to continue operations at the Hunan site by focusing on EV production. GAC, which has a 50 percent stake in GAC Mitsubishi, intends to leverage the facility to manufacture even more EVs. This move aligns with China’s goal of becoming a global leader in the EV industry. By capitalizing on the growing demand for EVs, GAC aims to strengthen its position in the market and further establish itself as a key player in the Chinese automotive industry.
The Future of Mitsubishi
Mitsubishi’s decision to withdraw from the Chinese market raises questions about the company’s future strategy. While it may be a setback for Mitsubishi in terms of sales and market presence, it could also be an opportunity for the company to refocus its efforts on other regions and markets where it has a stronger foothold. Mitsubishi has a global presence and can explore opportunities in regions such as Southeast Asia, where it has a strong customer base and brand recognition.
In conclusion, Mitsubishi’s exit from the Chinese market reflects the challenges faced by foreign automakers in a highly competitive and rapidly evolving industry. The rise of Chinese-branded vehicles and the booming EV market have significantly impacted Mitsubishi’s sales in China. However, this move also presents an opportunity for Mitsubishi to reassess its strategy and explore new avenues for growth. As the automotive landscape continues to evolve, it will be interesting to see how Mitsubishi adapts and positions itself for success in the future.