Japanese Car Giant Mitsubishi Exiting China: Report

The Mitsubishi Motors logo is displayed outside the company's headquarters in Tokyo on April 20, 2016. Tomohiro Ohsumi/Getty Images

Japanese car giant Mitsubishi Motors is looking to pull out of China entirely amid tough competition from domestic rivals and after a months-long production stoppage of its sport-utility vehicle (SUV) lineup after years of falling sales, according to reports.

Mitsubishi is in talks with local joint-venture partner Guangzhou Automobile Group (GAC) about exiting auto-making operations in China, according to Japanese news outlet Nikkei.

The Nikkei report said that GAC will probably convert their joint-production plant, located in Hunan Province, into a production base for electric vehicles (EVs).

The Japanese automaker did not immediately respond to an Epoch Times request for confirmation of its exit plan, but a spokesperson told Bloomberg that the company is “discussing future plans among shareholders and nothing is finalized yet.”

A security worker walks past a Mitsubishi Motors Outlander PHEV sport-utility vehicle displayed at the company's headquarters in Tokyo on April 20, 2016. Tomohiro Ohsumi/Getty Images

The development follows news in July that Mitsubishi’s joint venture with Chinese state-owned GAC was looking to cut staff after sharp sales declines for its SUVs.

At the time, GAC said in a statement that the joint venture, which started in 2012, would try to restructure its operations in a bid to rescue the partnership.

Mitsubishi said at the time that its China unit had fallen on hard times and that it was reviewing different parts of its business, with a view to revitalizing operations.

Earlier this year, Mitsubishi said it was suspending production of its Outlander SUV in China for three months and that it would take a $78 million charge for slowing sales at the joint venture.

Then, in May, Mitsubishi said it would extend the suspension indefinitely, though a spokesperson said the company was in talks with its Chinese partner on resuming operations.

Those talks now appear to have led nowhere as Mitsubishi is looking for the exits, according to Nikkei.

Mitsubishi and other Japanese automakers face a deepening sales slump in China as a rapid transition to EVs has led to tanking demand for gasoline-powered cars.

In 2022, Mitsubishi’s sales in China totaled 38,550 cars, down 60 percent from the year before.

A woman uses her phone in a showroom of Xiaopeng Motors, a Chinese electric car manufacturer, in Beijing, on March 19, 2021. Wang Zhao/AFP via Getty Images

Price War

Late last year, China’s electric vehicle market entered a fierce price war, made more intense by the looming termination of subsidies by Chinese authorities.

In October 2022, Tesla China slashed prices on its popular Chinese models. The discounts escalated further in January, with cuts that made locally produced cars up to 14 percent less expensive than in 2022.

Chinese automakers had little choice but to follow suit, and Western car companies such as Ford and Volkswagen jumped into the fray. Even with a corresponding price war in the West, some cars in China were about 50 percent cheaper than they were in the United States and Europe.

Economists say that despite huge state-supported investment in automobile production capacity in China, domestic demand for cars has stagnated.

In the first seven months of 2023, China sold 11.4 million cars at home and exported 2 million, but growth came almost entirely from abroad. Exports jumped by 81 percent, but domestic sales crept only 1.7 percent higher—despite widespread price cuts.

“The focus on production and supply is lopsided,” George Magnus, research associate at Oxford University’s China Centre, told Reuters.

Mr. Magnus said that insufficient attention had been placed on the demand side of the equation, leading to inventory gluts then deep price cuts in a desperate bid to move stock.

More Details

Including factories making combustion-engine cars, China had the capacity to produce 43 million vehicles a year at the end of 2022, but the plant utilization rate was 54.5 percent, down from 66.6 percent in 2017, China Passenger Car Association data show.

At the same time, pay cuts and lay-offs in the auto industry and its suppliers—which employ an estimated 30 million people according to Chinese state media—are affecting living standards at a time when Beijing desperately wants to lift consumer confidence from near record lows.

It has been a similarly brutal environment for auto suppliers in China as car prices have continued to fall, with the weighted average transaction price of EVs and hybrids in June down 15 percent from January at 185,100 yuan (about $25,300).

State-run China Automotive News estimates that there are more than 100,000 auto suppliers in the country. In a March survey of nearly 2,000 by auto parts-trading platform Gasgoo, 74 percent said automakers had asked them to reduce costs.

More than half were asked for reductions of 5 to 10 percent, higher than the 3 to 5 percent targets of previous years. Nine out of 10 companies expected more such requests this year.

The EV battery market has also turned, with suppliers cutting prices for automakers.

Shan Lin and Reuters contributed to this report.