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Saturday, July 26, 2014

Mitsubishi Motors Future: Summer Guest Post #1

This post was written May 12, 2014 by Anton Reed '14 for Economics 244. The Prof edited it and appended comments by others in the class.

Nissan acquired MMC and is now in the process of redesigning product to share components and rethinking product lineup and factory utilization. See ongoing coverage by Hans Greimel in Automotive News. the prof, Mar 2017

For my own analysis see Mitsubishi Motors: Going-going ... gone? on this site.

2014 Asian OEM Market Relative Share

In April, when they released their FY2013 annual results, MMC (Mitsubishi Motors Corp) reported record profits. Don't get too excited.

Mitsubishi Motors' North American operations are struggling; MMC sells far less than any other Asian car company in North America. The next smallest, Mazda, sold almost three and a half times as many vehicles in April 2014. Only six firms sold fewer cars, and of those only Volvo is not a niche luxury marque. (The other five, in decline order of sales, are Jaguar/Land-Rover, Porsche, Tesla, Maserati and Ferrari.)

There are positive signs, with April sales up 46.6% over 2013 and year to date sales up 29%. Only Maserati had a larger increase, but they sold 753 vehicles last year, so that shift represents only a few additional cars. On the other hand, among manufacturers building cars for mainstream customers, Mitsubishi sells the least, so its percentage increase likewise represents only a modest absolute change. Nevertheless Mitsubishi has been improving its North American operation, with net sales up 53% from 2012 to 2013.

Such sales however mean that MMC's Illinois plant – begun in 1988 as Diamond-Star during the era when Chrysler was a major shareholder – continues to operate in the red. Whether or not Mitsubishi will be able to mount a comeback from the brink of essentially complete failure in North America will depend heavily on the continued expansion of their share and the overall vehicle market. Summer sales are expected to be substantial enough to grow the car market in 2014 over 2013, but that increase won't be enough to float MMC. Mitsubishi will likely see its sales cannibalized by the other automakers and go the way Suzuki, Isuzu and Daihatsu, Japanese firms that have completely withdrawn from North America.

Sources: www.motorintelligence.com and www.mitsubishicars.com. Sales graph on right added by the Prof.


Louis Ike · 
I do not see Mitsubishi making much of a resurgence in sales here in North America. The number of dealerships around any one geographic location is much lower than its competitors, and this only mimics the pattern of low sales volume. The cars that Mitsubishi is currently making, to put it simply, do not fit the consumer preferences of the modern North American. In my opinion, Mitsubishi needs a serious rebranding because its public image is one of cheap, ugly, and obsolete vehicles.

Jier Qiu · 
I think an important reason that Mitsubishi is making profit right now is their new Mirage, which is a reliable, affordable, and fuel-friendly vehicle. I am personally very fond of the brand because their good designs. Although it is pretty easy to get an operating profit from cutting backs and fewer newe investments, I still think Mitsu has the potential to compete in light vehicle sector in the future with Mirage as a good start. They also need to deal with their dealership issue in North America.
the prof · 
Isn’t it the weak yen? It was ¥75 per dollar, now it’s ¥101 / US$. That’s a huge benefit to exporters.

Kade Kenlon · 
It would be interesting to know on the pie chart what percentage of the market that the Asian car companies control. Not only would it put the Mitsubishi market share in perspective, but it would tell you what the potential is for Asian cars. The higher the percentage of Asian cars controlling the market, the better chance Mitsubishi has to succeed. Mitsubishi would have a much easier time overtaking another asian car company rather than an American car, mainly because the Asian cars share the same concept, they are meant to be appliances.
the prof · 
At one time "Asian" might have mattered. As Toshi Amino [retired VP Honda Mfg of America] noted at our lunch table in Ohio, the Marysville plant ranked equal or higher in quality on internal audits than Sayama in Japan, but in the early years [1980s] American consumers wanted a “Made in Japan” vehicle.

Now however do consumers even know (much less care!) that MMC is a “Japanese” company? Or that the vehicle was made inside NAFTA, or imported from Japan / Korea / Europe? It’s an empirical question, and the surveys I've seen suggest consumers no longer care about national identity and import status, though "Munroney sticker" legislation mandates manufactures provide those details on the window sticker found on all new cars.
See my thoughts on MMC here: Mitsubishi Motors: going, going … gone?


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