Japan's Mitsubishi Motors to end production in China

Mitsubishi Motors has decided to withdraw from automobile production in China.

The company has started final withdrawal talks with China's Guangzhou Automobile Group (GAC), a major automaker with which Mitsubishi has a joint venture, Nikkei has learned.

Mitsubishi's sales in China have been sluggish due to the popularity of electric vehicles and the rise of local brands. Other Japanese automakers are also struggling and might review their strategies in the country.

GAC Mitsubishi Motors has a factory in Hunan province. The company halted production in March; it will not resume operations. The Hunan plant is Mitsubishi's only factory in China.

GAC is expected to use the Hunan plant for EV production and try to maintain a certain level of employment. GAC has a 50% stake in GAC Mitsubishi, Mitsubishi Motors owns 30% and trading house Mitsubishi Corp. holds 20%. GAC Mitsubishi will remain as a corporate entity, but Mitsubishi Motors and Mitsubishi Corp. will withdraw their investments.

Mitsubishi in 2022 sold 38,550 cars in China, down about 60% from the previous year. To reverse the trend, it launched a hybrid, the Outlander SUV, for the China market last fall, though sales came in below projections.

As it withdraws from China, Mitsubishi will devote resources to Southeast Asia and Oceania, regions that account for about a third of Mitsubishi's consolidated sales.

According to the China Association of Automobile Manufacturers, EV sales in 2022 increased by 80% to 5.36 million cars, accounting for around 20% of all new car sales in the country. Mitsubishi has no proprietarily developed EVs in China as GAC has supplied these vehicles.

In addition, competition with Chinese manufacturers is heating up. According to research firm MarkLines, passenger car sales in China in 2022 amounted to 23.56 million units, with Chinese brands accounting for 50.7% of those sales, 5.2 percentage points higher than the previous year.

Japanese companies picked up 18.3% of the market, down 2.8 percentage points.

Makoto Uchida, president and CEO of Nissan Motor, recently lamented market conditions. "We are not at a level where we can make a profit due to extremely heavy discounting," he said. "We are considering our options, including reviewing our strategy such as our joint ventures in China."

Mitsubishi began exporting commercial vehicles to China in the 1970s and was involved in a joint venture with Soueast Motor from 2006 to 2021. GAC Mitsubishi Motors was established in 2012 and sold 140,000 vehicles in 2018, its peak year.