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Mitsubishi Motors Decides to Cease Car Production in China

Mitsubishi Motors Corp. is set to terminate its car production operations in China, as reported by the Nikkei, marking a significant move following a prolonged period of lackluster sales in the country. The Japanese automaker had previously suspended its business...
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Mitsubishi Motors Corp. is set to terminate its car production operations in China, as reported by the Nikkei, marking a significant move following a prolonged period of lackluster sales in the country. The Japanese automaker had previously suspended its business activities in China two months ago.

The company is currently in the final stages of negotiations with its Chinese joint venture partner, Guangzhou Automobile Group Co., to discontinue manufacturing activities in the region. Although the source of this information remains undisclosed, a spokesperson from Mitsubishi Motors has confirmed discussions regarding future plans among shareholders are ongoing and that no final decisions have been made.

GAC Mitsubishi Motors Co., the joint venture in question, operates a factory in Hunan province in southern China. Mitsubishi Motors had previously announced the indefinite suspension of its China business earlier this year and had plans for staff layoffs. A company memo circulated on Chinese social media platforms on July 12, revealing that sales had fallen considerably short of expectations in a market rapidly shifting towards electric vehicles (EVs).

Mitsubishi's struggles in China mirror the challenges faced by other Japanese automakers, which have been relatively slow in introducing EVs and have consequently lost market share to newer competitors like Tesla Inc. and BYD Co.

Sales of Honda Motor Co. and Nissan Motor Co. in China, the world's largest car market, had been declining for at least two years. Toyota Motor Corp. also experienced a drop in deliveries for the first time in a decade last year.

Mitsubishi Motors CEO Takao Kato acknowledged in May that a strategic reassessment of the company's approach in China was necessary.

Chinese consumers have embraced EVs more enthusiastically than any other demographic; in fact, one in every four cars sold in China last year was electric. While Japanese carmakers have pledged to increase their EV offerings, they are engaged in a challenging race to catch up with industry leaders like Tesla and BYD, as well as various Chinese manufacturers such as Nio Inc. and Xpeng Inc.

Mitsubishi Motors' performance in China reflects these challenges. In 2022, the company sold only 515 of its electric Airtrek sport-utility vehicles in China. Furthermore, its overall production in the country dropped to just 1,530 cars in January and ultimately ceased as operations were suspended.

To address the evolving automotive landscape, Mitsubishi Motors announced plans in March to invest as much as ¥1.8 trillion (approximately $12 billion) in electrification by 2030. The company's shares have seen a roughly 20% increase in Tokyo since the beginning of April.

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