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Mitsubishi Motors has suspended production in China indefinitely and plans to cut staff after the Japanese manufacturer struggled to respond to a rapid transition to electric vehicles in the world’s largest car market.
The pullback by Mitsubishi comes as foreign carmakers face fierce competition with domestic marques. The chief executive of rival Mazda warned on Friday that the Chinese market was 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 a turnaround by reviewing how they managed the business in China and “optimising the workforce”, stressing that it was not withdrawing from the market.
GAC said in a statement that shareholders are “trying their best to safeguard employees’ lawful rights and interests”.
Sales of Japanese cars have been hit hard in China after their manufacturers’ slow rollout of electric vehicles and a price war sparked by Tesla. In June, Japanese brands’ share of China’s auto market fell to 17.8 per cent, down from 21.5 per cent in the same month last year, according to the China Passenger Car Association (CPCA).
Production in China had been halted since March at Mitsubishi’s joint venture with state-owned GAC after sales of its new petrol-based Outlander sport utility vehicle flopped. Mitsubishi has yet to introduce a pure electric vehicle and its Changsha-based factory produced only 3,367 vehicles in the first five months of the year, a decline of 75 per cent from a year earlier, data from CPCA showed.
In the past fiscal year, Mitsubishi Motors reported a 41 per cent year-on-year drop 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 intensifying competition. In January, Honda’s joint venture with GAC announced that it had discontinued producing and selling cars under the Japanese group’s luxury brand Acura.
“The foreign brands have lost their technology advantage and at the same time, Chinese consumers seem more willing to buy domestic brands,” Ding Yuqian, an auto analyst with HSBC, wrote in a research report.
The joint venture, known as GAC Mitsubishi Motors, saw its sales peak at 144,000 units in 2018 and fall to 33,600 units last year.
Separately on Friday, Masahiro Moro, the newly appointed chief executive of Mazda, said the company was likely to struggle with boosting profits in China this year, despite its aggressive target to grow annual vehicle sales by 48 per cent in the current financial year through March 2024.
“It does seem like we are entering a stage where only the strongest will survive and gain momentum,” Moro said. “The competitive environment is tougher than we expected.”
But Moro added that the company still wanted to “go on the offensive” 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.