Mitsubishi suspends production in China due to declining car sales

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Mitsubishi Motors has indefinitely suspended production in China and plans to cut workforce after the Japanese maker struggles to adapt to a rapid shift to electric vehicles in the world’s biggest car market.

Mitsubishi has taken this step at a time when foreign car manufacturers are facing tough competition from domestic companies. The chief executive of rival Mazda warned on Friday that the Chinese market is entering a phase where “only the strongest will survive”.

Following reports in local media, Mitsubishi said shareholders in its joint venture with Guangzhou Automobile Group (GAC) would seek changes by reviewing how they managed business in China and “optimizing the workforce”. Insisted that he is not withdrawing from the market.

The GAC said in a statement that the shareholders were “doing their best to protect the legitimate rights and interests of the employees”.

Sales of Japanese cars in China have been badly hit following the slow rollout of electric vehicles by their manufacturers and a price war waged by Tesla. According to the China Passenger Car Association (CPCA), the share of Japanese brands in China’s auto market fell to 17.8 percent in June from 21.5 percent in the same month last year.

Mitsubishi’s new petrol-based Outlander sport utility vehicle was halted in March in its joint venture with state-owned GAC after sales flopped in China. CPCA data shows Mitsubishi has yet to introduce a pure electric vehicle and its Changsha factory produced only 3,367 vehicles in the first five months of the year, a 75 percent drop from a year earlier .

In the last financial year, Mitsubishi Motors reported a 41 per cent year-on-year decline in vehicle sales in China, Taiwan and Hong Kong.

The move makes Mitsubishi one of the first major foreign carmakers to suspend production in China amid increasing competition. In January, Honda’s joint venture with GAC announced it had stopped producing and selling cars under the Japanese conglomerate’s luxury brand Acura.

“As foreign brands have lost their technology advantage and at the same time, Chinese consumers appear more inclined to buy domestic brands,” Ding Yuqian, an auto analyst at HSBC, wrote in a research report.

Sales of the joint venture, known as GAC Mitsubishi Motors, peaked at 144,000 units in 2018 and fell to 33,600 units last year.

Separately on Friday, Mazda’s newly appointed chief executive Masahiro Moro said the company may struggle to grow profits in China this year, despite an aggressive 48 percent increase in annual vehicle sales through March in the current fiscal year. The target has been set. 2024.

Moro said, “It seems as though we are entering a phase where only the strongest will survive and gain momentum.” “The competitive environment is tougher than we expected.”

But Moro said the company still wants to “move forward aggressively” by strengthening the rollout of electric vehicles in China. The Japanese carmaker has said it wants to introduce two locally produced electric vehicles in China by 2025.