Stringent emission standards and increasingly stringent technical regulations have made Europe a difficult place for a big multinational car.
Mitsubishi to focus on ASEAN
Moreover, as the EU becomes more and more a niche market, new consumers end up elsewhere.
Driven by similar considerations, Mitsubishi Motors Corporation (MMC) recently announced its intention to suspend its operations in Europe after the current production line ends.
In doing so, MMC, a few years after its ‘compatriot’ Daihatsu, decided to leave Europe, where it had been present since 1975, to focus on the emerging and increasingly profitable markets of Southeast Asia.
According to Sammu Chan, senior analyst at LMC automotive, Japanese automakers have a problem with Europe: “From emissions regulations and difficult market conditions to premium segment pressure and domestic competition prices, they face a nightmare scenario when it comes to the issue of sustainable profitability in Europe.”
The issue of emissions
The biggest concern seems to be the issue of emissions, particularly when you look at the fines that the European Union is threatening to impose on the United Kingdom under the coal emission regulations.
“With such strict CO2 targets in Europe” – according to Chan – “a clear EV strategy is needed to thrive over the next decade”, which not everyone seems to be able to afford.
In a well-established market like Europe, automakers face the challenge of smart technology, caught between competitive pressure and the urgency of investment. The new economic recession caused by the COVID-19 pandemic certainly did not help a sector already experiencing a physiological sales slowdown.
Small but Beautiful
Therefore, the Japanese manufacturer is focusing the new development plan on “rationalizing costs and improving profitability”, which it hopes will put the brand back on a sustainable growth trajectory over the next three years. The medium-term project, called “Small but Beautiful”, involves reallocating management resources in new emerging markets and reinforcing primary technologies: European operations will no longer be a priority.
Mitsubishi’s focus will instead be on ASEAN countries, which currently generate about a quarter of the company’s total sales, and where the company aims to achieve a market share of 11%, before resuming its global expansion. As part of its global restructuring, Southeast Asian factories are set to play a key role in supplying new products to other emerging markets around the world such as those in Latin America and Africa. The strategy also includes an innovation in the Mitsubishi range through the introduction of plug-in hybrid and electric vehicles, which will initially go to the ASEAN market only. The new models will benefit from the technology developed during its alliance with Renault and Nissan.
“By integrating these technologies – the company stressed – Mitsubishi will launch ecological models that will contribute to the development of a society in which people, cars and nature can coexist in harmony.” By choosing to focus on ASEAN instead of dispersing around the world, the carmaker decided to invest in the region’s extraordinary development history. Mitsubishi already has a production base in Vietnam, as well as Thailand, Indonesia, and the Philippines. The plan is to add Myanmar to the list, even though the recent coup might cause society to reconsider this objective.
In a moment of great difficulty, Mitsubishi decided to go back to ASEAN. In Southeast Asia, the company will face a very different market from the European market, less rigid in terms of emissions and more favorable to the purchase of products not necessarily in line with the latest technologies. The choice of the region as a manufacturing location for components and vehicles for new emerging markets will also have a very significant impact on the work and production and entry of electric vehicles in the ASEAN countries.