According to the Nikkei newspaper, which cited sources, Mitsubishi Motors is planning to end automobile production in China. The move follows the carmaker’s indefinite suspension of operations there in July and a plan to cut staff. Mitsubishi’s sales have fallen far below expectations in the world’s largest auto market as it struggles to adapt to a shift to electric vehicles.
Mitsubishi’s decision reflects the challenge facing fellow Japanese carmakers, who have struggled to roll out electric cars and have lost share in the race to capture Chinese demand. Mazda Motor Corp Chief Executive Officer Masahiro Moro said in March that heightened competition in the world’s largest EV market would mean “only the strongest will survive,” according to the Financial Times.
In a statement, Mitsubishi told shareholders in its joint venture with GAC that the company was exploring a turnaround of its business and optimizing its workforce. GAC will likely convert the plant, located in Hunan province, into a production base for electric vehicles. It will continue to supply Mitsubishi with engines. Mitsubishi’s annual sales in China peaked in 2019 at around 134,500. However, the company’s output rate dwindled to just 1,530 in January and to zero in April. It has only one electric vehicle in the country, a compact SUV called the Airtrek, which sold 515 units last year.
A Mitsubishi Eclipse built at its only North American factory in Normal, Illinois, will head to China. Mitsubishi has sent about 1,000 Eclipses to China so far, including some models made at its factory in Normal, as part of a three-year effort to build a global customer base.
The suspension of Mitsubishi’s operations in China followed a memo that warned employees that sales would continue to fall in a market where customers were turning to local brands. Mitsubishi and its partner, state-owned GAC, have a joint venture that produces and sells vehicles under the brand name Outlander in the country.
Mitsubishi and GAC will be joined in pulling out of the Chinese market as they face stiffer competition from local Chinese automakers. Honda’s joint venture with GAC also halted operations in January and plans to reduce its workforce. The company cited rising costs and consumer preferences for the move. Shares of Honda and Mitsubishi dropped after the news broke. Both companies invest heavily in electric vehicles, hoping to catch up with Tesla Inc and other new competitors. They have also been working to boost their global footprint by forming alliances with Renault SA. The carmakers have agreed to develop five EV platforms starting in 2026 jointly, and the Renault-Mitsubishi-Automobiliare joint venture is expected to produce a new model based on one of those vehicles by 2020. The two companies have also agreed to work on a partnership involving building electric buses. The partnership aims to speed up the development of a global mass-market electric bus.