[News] Mitsubishi Motors Ceases Car Production in China, Possible Takeover by GAC Aion

2023-10-05 Emerging Technologies editor

As reported by Nikkei Chinese, Mitsubishi Motors from Japan has made the decision to halt car manufacturing operations in China. This move comes as Mitsubishi Motors engages in final discussions with its local joint venture partner, Guangzhou Automobile Group (GAC Motor).

In China, Mitsubishi Motors has been struggling with reduced sales due to the growing popularity of electric vehicles (EVs) and the increasing appeal of local brands. This strategic shift might have wider implications for other Japanese automakers. What lies ahead for the production facility originally situated in Changsha, Hunan?

Challenges Faced by Mitsubishi Motors in Overseas Expansion, Sluggish Sales of “Outlander”

The factory located in Changsha, Hunan, which was operated by the joint venture “GAC Mitsubishi Motors” with Guangzhou Automobile Group holding a 50% stake, Mitsubishi Motors with 30%, and Mitsubishi Corporation with 20%, will be shut down. New car production at this facility has been halted since March due to poor sales, and there are no plans for a restart.

While the joint venture itself will continue to exist, it is expected that Mitsubishi Motors and Mitsubishi Corporation will withdraw their investments. Their plan is to focus resources on Southeast Asia and Oceania, which collectively contribute to one-third of the overall operating income.

In 2022, Mitsubishi Motors witnessed a 60% year-on-year decline in sales in China, with a total of only 38,550 vehicles sold. In an attempt to stimulate sales, they introduced a hybrid version of the “Outlander” model tailored for the Chinese market in December 2022, but the actual sales figures fell significantly short of expectations.

With the news of the factory closure becoming public, both shareholders will need to provide 1.884 billion RMB in financial support to ensure its continued operation. A recent communication letter from GAC Mitsubishi Motors addressed to all employees has garnered significant attention online, signifying the heightened interest from Chinese consumers in Mitsubishi Motors. However, it also marks the official departure of GAC Mitsubishi Motors from the stage of Chinese automotive history.

What Lies Ahead for Mitsubishi’s Factory? Potential Takeover by GAC Aion

Tetsuji Inoue, the spokesperson for Mitsubishi Motors, recently stated that Mitsubishi Motors in Japan is in the final stages of negotiations with major shareholders, including Guangzhou Automobile Group. According to Nikkei Chinese, Guangzhou Automobile Group may transform GAC Mitsubishi Motors’ manufacturing facility in Changsha, Hunan, into a production base for electric vehicles (EVs).

According to JiWei, GAC Aion, a subsidiary of Guangzhou Automobile Group, is poised to assume control of the factory. In addition to inheriting the existing factory, production lines, and workforce, Aion is also expected to acquire the R&D center, which encompasses a styling laboratory, EMC testing facility, new energy testing laboratory, comprehensive testing laboratory, prototype workshop, and research building, all backed by an investment of 670 million RMB.

Regarding sales, data reveals a sharp decline in GAC Mitsubishi Motors’ sales in China, plummeting from 144,000 vehicles in 2018 to a mere 33,600 vehicles in 2022. In contrast, GAC Aion currently stands out as the top-performing company among domestic newcomers in the automotive industry. In September this year alone, they delivered a total of 51,600 vehicles, marking the second consecutive month with monthly deliveries surpassing 50,000 vehicles and a year-to-date total of 360,000 vehicles delivered.

(Image Source: GAC Mitsubishi Outlander 2022)