Mitsubishi Motors, the Japanese carmaker, has made the decision to cease vehicle production in China, signaling another retreat by foreign automakers from the world's largest car market. Confirming weeks of speculation, the company announced on Tuesday its plans to wind down local manufacturing operations and exit a longstanding joint venture in mainland China.
In a statement, Mitsubishi stated that it was undertaking a significant restructuring of its strategy for the highly competitive Chinese market, which has witnessed a decline in sales in recent years. The company attributed this decline to the accelerated shift toward electric vehicles and the changing preferences of consumers in terms of brands and segments.
Mitsubishi revealed that it had been attempting to recover its sales volume by introducing a new car model in December 2022. However, the company fell short of its sales targets, leading to the suspension of production since March this year in order to adjust its inventory.
Under its new business revamp, Mitsubishi will transfer its stake in its Chinese joint venture to its existing partner, Guangzhou Automobile Group Company (GAC). GAC will continue to utilize the production site for the manufacture of electric vehicles, becoming the sole owner of the unit, which was initially established in 2012.
As a result of this restructuring, Mitsubishi expects to incur a loss of approximately $162.2 million for the fiscal year ended March 2024. The company has not yet clarified whether it plans to continue selling imported vehicles in China.
This development follows Stellantis, the parent company of brands like Jeep and Chrysler, also announcing its withdrawal from China. Last week, Stellantis agreed to sell important assets jointly owned with Dongfeng Motor Group, its Chinese partner. Dongfeng revealed in a stock exchange filing that it would acquire land use rights and buildings in the Chinese cities of Wuhan and Xiangyang, previously dedicated to Peugeot and Citroën vehicle production, for approximately $232.5 million.
This move aligns with Stellantis' broader strategy shift, announced in July 2022, to adopt an "asset-light approach" in China by terminating its joint venture in the country. Interestingly, this decision came as a surprise since Stellantis had previously expressed interest in increasing its stake in the joint venture. In October 2022, the joint venture filed for bankruptcy. Stellantis, however, continues to sell imported vehicles in China through its dealerships.
Meanwhile, Mitsubishi has already made plans to increase its investments elsewhere. The company announced its support for Ampere, an electric vehicle unit established by French automaker Renault. Mitsubishi plans to invest up to €200 million ($212 million) in Ampere, aiming to further penetrate the European market.
In summary, Mitsubishi Motors' decision to halt production in China and exit its joint venture reflects the challenges faced by foreign automakers in the country's competitive market. This move comes in the midst of a global shift towards electric vehicles and evolving consumer preferences. As Mitsubishi restructures its business, it has chosen to transfer its stake to GAC, while Stellantis continues to pursue its asset-light strategy in China. Both companies are redirecting their focus and investments toward the growing electric vehicle sector.