Mitsubishi Is Pulling Out Of China's Auto Market

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by Tyler Durden
Thursday, Sep 28, 2023 - 12:00 AM

We have been writing over the last few months about increased competition in China's EV market and (most recently) about intense EU scrutiny over Chinese subsidies, which the EU claims is mucking up its electric vehicle market by driving prices lower. 

Now, one Japanese automaker is backing out of China altogether. Mitsubishi "has started final withdrawal talks with China's Guangzhou Automobile Group", its joint venture partner in China, according to Nikkei. The company has been suffering from "sluggish sales", the report says, noting that other Japanese automakers are also reassessing their viability in the Asian country. 

GAC Mitsubishi Motors has shuttered its manufacturing operations in Hunan province indefinitely, marking the end of Mitsubishi's sole factory in China. GAC, which holds a 50% share in the joint venture, plans to repurpose the Hunan facility for electric vehicle (EV) production while aiming to retain some level of its workforce, the report says. 

Mitsubishi Motors and Mitsubishi Corp., owning 30% and 20% stakes respectively, will pull their investments, although GAC Mitsubishi will continue to exist as a business entity.

Nikkei notes that in 2022, Mitsubishi's car sales in China plummeted by 60% to 38,550 vehicles. An attempt to revive sales with the launch of the hybrid Outlander SUV last autumn failed to meet expectations. Mitsubishi now plans to reallocate resources to Southeast Asia and Oceania, areas responsible for about one-third of the company's consolidated sales.

Meanwhile, the electric vehicle market in China is booming, with a report from the China Association of Automobile Manufacturers indicating an 80% surge in EV sales in 2022 to 5.36 million units. Mitsubishi has lagged in this segment, relying on GAC for EV supplies in China.

Competition from Chinese auto manufacturers is also intensifying. Data from research firm MarkLines shows that Chinese brands captured 50.7% of the passenger car market in 2022, an increase of 5.2 percentage points from the previous year. Japanese companies accounted for 18.3% of the market, a decline of 2.8 percentage points.

Nissan Motor's president and CEO, Makoto Uchida, recently expressed concern over the challenging market conditions, citing unsustainable discounting practices and hinting at a potential reevaluation of Nissan's joint ventures in China, according to the report

Mitsubishi has had a long history in China, dating back to the 1970s when it began exporting commercial vehicles. It formed a joint venture with Soueast Motor that lasted from 2006 until 2021. GAC Mitsubishi Motors was established in 2012 and reached its zenith in 2018 with 140,000 vehicles sold.

It isn't just Japanese automakers that the heat is getting turned up on in China. Recall yesterday we wrote that Tesla was part and parcel with the ongoing EU investigation into Chinese subsidies. 

EU executive vice-president Valdis Dombrovskis said this week that there was “sufficient prima facie evidence” to support the probe, FT reported on Tuesday morning. We had previously written about the EU's investigation and Beijing's response via The Global Times. 

In an interview this week, responding specifically to whether or not Tesla would be included in the investigation, Dombrovskis said: “Strictly speaking, it’s not limited only to Chinese brand electrical vehicles, it can be also other producers’ vehicles if they are receiving production-side subsidies.”

He said he was "constantly pressed by his Chinese counterparts about the probe" after a five day trip to China, FT wrote.

“The EU is now probably the largest market which is open for Chinese producers,” he commented, defending the investigation. He said that the EU was "open to competition" but that it "needs to be fair".