Nissan will push Mitsubishi to revamp its ailing China business
Mitsubishi started building vehicles in China before most of its global competitors.
And yet its niche in China is negligible, with sales of fewer than 63,000 cars last year in a market with light-vehicle sales of more than 21 million.
Mitsubishi should have revamped its Chinese operations, but that never happened as the company kept changing local partners. But now that Nissan is about to gain control, an unexpected opportunity has emerged for Mitsubishi to reinvent itself.
And the opportunity has arrived in the form of an obligation. Under existing policy, a foreign automaker is barred from having more than two production joint ventures with Chinese partners.
Mitsubishi now has two joint ventures -- one with Fujian Motor Industry Group Co. and the other with Guangzhou Automobile Group Co. Meanwhile, Nissan also has a partnership with Dongfeng Motor Corp.
After Mitsubishi sells a 34 percent stake to Nissan, Mitsubishi will be considered a Nissan affiliate, and Nissan thus will have three joint ventures in China. One of those local partnerships will have to go.
In fact, Mitsubishi should have shut down one of its ventures long ago.
The company formed its first Chinese partnership in 1996, when it purchased a 20 percent stake in a small Chinese SUV manufacturer, Hunan Changfeng Motor Co. That same year, Changfeng began producing the Mitsubishi Pajero crossover.
Mitsubishi got involved in its second joint venture in 2000, when DaimlerChrysler AG acquired a 37 percent stake in Mitsubishi. That allowed DaimlerChrysler's Chinese partner, BAIC Motor Group Co., to assemble the Outlander and Pajero.
That was a good deal for Mitsubishi, which achieved record China sales of 145,000 vehicles in 2003.
But the Japanese automaker cut its ties with DaimlerChrysler one year later, and BAIC stopped producing its vehicles. Following the breakup, Mitsubishi's deliveries nosedived and never recovered.
Mitsubishi subsequently formed joint ventures with two automakers -- state-owned GAC and a small company called Southeast Motor Co. -- but neither partnership revived sales. Its partnership with Changfeng was terminated after Changfeng was acquired by GAC in 2010.
In fact, Mitsubishi flopped in China for the same reason it flopped in the United States: It is a small automaker that lacks the products or technology to compete.
So now Mitsubishi is stuck with two Chinese partnerships that it is ill-equipped to support.
Will Beijing bend its rules to allow Mitsubishi to keep both joint ventures? Not likely. Beijing is very strict with its policy that forbids foreign automakers from running more than two ventures.
Just ask Subaru. A few years ago, Fuji Heavy Industries Ltd. sought to partner with Chinese car dealer group Pang Da Automobile Trading Co. to produce Subaru vehicles in China.
But its application was turned down by the Chinese government on the ground that Toyota already has two joint ventures in China. So, as it is about to seal the deal with Nissan, Mitsubishi will have no choice but to wind down one of its joint ventures in China.
Mitsubishi's leaders may have thought about closing one of the partnerships, but they probably never imagined they would have to do it so quickly.
Mitsubishi should have revamped its Chinese operations, but that never happened as the company kept changing local partners. But now that Nissan is about to gain control, an unexpected opportunity has emerged for Mitsubishi to reinvent itself.
And the opportunity has arrived in the form of an obligation. Under existing policy, a foreign automaker is barred from having more than two production joint ventures with Chinese partners.
Mitsubishi now has two joint ventures -- one with Fujian Motor Industry Group Co. and the other with Guangzhou Automobile Group Co. Meanwhile, Nissan also has a partnership with Dongfeng Motor Corp.
After Mitsubishi sells a 34 percent stake to Nissan, Mitsubishi will be considered a Nissan affiliate, and Nissan thus will have three joint ventures in China. One of those local partnerships will have to go.
In fact, Mitsubishi should have shut down one of its ventures long ago.
The company formed its first Chinese partnership in 1996, when it purchased a 20 percent stake in a small Chinese SUV manufacturer, Hunan Changfeng Motor Co. That same year, Changfeng began producing the Mitsubishi Pajero crossover.
Mitsubishi got involved in its second joint venture in 2000, when DaimlerChrysler AG acquired a 37 percent stake in Mitsubishi. That allowed DaimlerChrysler's Chinese partner, BAIC Motor Group Co., to assemble the Outlander and Pajero.
That was a good deal for Mitsubishi, which achieved record China sales of 145,000 vehicles in 2003.
But the Japanese automaker cut its ties with DaimlerChrysler one year later, and BAIC stopped producing its vehicles. Following the breakup, Mitsubishi's deliveries nosedived and never recovered.
Mitsubishi subsequently formed joint ventures with two automakers -- state-owned GAC and a small company called Southeast Motor Co. -- but neither partnership revived sales. Its partnership with Changfeng was terminated after Changfeng was acquired by GAC in 2010.
In fact, Mitsubishi flopped in China for the same reason it flopped in the United States: It is a small automaker that lacks the products or technology to compete.
So now Mitsubishi is stuck with two Chinese partnerships that it is ill-equipped to support.
Will Beijing bend its rules to allow Mitsubishi to keep both joint ventures? Not likely. Beijing is very strict with its policy that forbids foreign automakers from running more than two ventures.
Just ask Subaru. A few years ago, Fuji Heavy Industries Ltd. sought to partner with Chinese car dealer group Pang Da Automobile Trading Co. to produce Subaru vehicles in China.
But its application was turned down by the Chinese government on the ground that Toyota already has two joint ventures in China. So, as it is about to seal the deal with Nissan, Mitsubishi will have no choice but to wind down one of its joint ventures in China.
Mitsubishi's leaders may have thought about closing one of the partnerships, but they probably never imagined they would have to do it so quickly.
