Mitsubishi Motors targets Southeast Asia as growth 'weapon'
Automaker says region is key to its role in Renault-Nissan alliance
HIROSHI KOTANI and REI NAKAFUJI, Nikkei staff writers
June 08, 2018 12:51 JST
BANGKOK/TOKYO -- Mitsubishi Motors has identified the Southeast Asian market as the key to successfully establishing itself within its alliance with Renault and Nissan Motor.
The company is reinforcing its presence in the region, and expects to set a record for unit sales for the first time in six years in fiscal 2018.
Southeast Asia now accounts for nearly half of the automaker's consolidated operating profit.
Mitsubishi Motors joined the Renault-Nissan alliance a year and a half ago in the aftermath of a scandal involving rigged fuel-economy data. If it is to play a prominent role in the alliance, the company needs to continue growing in the Southeast Asian market, where its French and Japanese partners have struggled to compete.
The company’s Thai unit, which was founded in 1987, on June 4 marked the cumulative production of 5 million vehicles. "Our Southeast Asian business is a weapon enabling us to contribute to the tripartite alliance," said Osamu Masuko, CEO of the Japanese automaker. "We will take the initiative in expanding operations in this region."
The Xpander minivan released in September has been a huge hit in Indonesia. Designed to look like a sport utility vehicle but with three rows of seats, the model is expected to help the automaker more than double its sales in the country to 137,000 units in fiscal 2018 from fiscal 2016.
About 70% of advance orders for the Xpander have been made by people who already drive other models, according to one of its dealers in Jakarta.
Sales are also increasing in Thailand, and Mitsubishi plans to sell 310,000 units in Southeast Asia in fiscal 2018, up 14% from the previous year. That figure is three times higher than the automaker’s sales in its home market and accounts for 25% of its global total.
Mazda Motor, a rival in terms of global unit sales, by comparison, relies on the region for 7% of worldwide sales.
In addition, Mitsubishi Motors is expected to post nearly 50% of 110 billion yen ($1 billion) in group operating profit from the Southeast Asian market in fiscal 2018. In contrast, the automaker is forecast to incur an operating loss in Japan for the fourth consecutive year due to high fixed costs.
Large pickup trucks are uncommon in Japan, but form the foundation of the company's earnings in Southeast Asia, where road surfaces can be uneven.
While many automakers are competing in the region's passenger car market, Toyota Motor, Isuzu Motors, Ford Motor and Mitsubishi Motors enjoy stable earnings in the pickup segment. Model changeovers tend to be made every eight to 10 years, a longer period than for passenger cars, which enables manufactures to post steady profits.
Manufacturing pickups requires a different factory setup than passenger cars. Mitsubishi consolidated the production of its pickup trucks in Thailand in 1995 and accelerated exports from the country following the depreciation of the baht amid the 1997 Asian financial crisis. It now ships its products to 120 markets from Thailand and conducts part of its development work there.
Financial difficulties have forced the company to stop manufacturing in Australia and the U.S. It maintains operations in Russia but has pulled out of the rest of Europe. The Thai unit, which is capable of producing 420,000 vehicles per year, is its largest overseas production base and has a particular strength in pickup trucks and SUVs.
The automaker also operates plants in Indonesia and the Philippines. It has increased production in the latter since acquiring a facility from Ford in 2015, reinforcing local production of its Mirage small passenger cars. In the January-April period, it held a 17.6% share of new car sales in the country, trailing only Toyota.
The company has been widening its dealership networks in Indonesia and the Philippines with support from trading houses such as Mitsubishi Corp. and Sojitz.
Confidence in the Mitsubishi brand has not suffered from the data falsification scandal as much in Southeast Asia as it has in Japan.
But despite the strong earnings, Mitsubishi Motors is far from a regional leader. In 2017, it ranked fifth in terms of market share in Southeast Asia’s three largest markets with 6%. Toyota and its wholly owned subsidiary Daihatsu Motor are by far the dominant players in the region.
Masuko said on June 4 that the company would seek approval to start local production of plug-in hybrid vehicles from the Thai government later this year.
As Nissan and Renault’s sales in Southeast Asia remain weak, the addition of Mitsubishi Motors to the alliance will help it establish a stronger position, said Carlos Ghosn, chairman of all three companies. Ghosn has set a target of making the alliance one of the three dominant forces in the region.
Following Nissan's investment in Mitsubishi Motors, Ghosn looked at ways to integrate operations. In Thailand, the two companies have started joint delivery of vehicles to dealerships and will soon do the same in Indonesia and the Philippines. They have also started sharing a road test center in Thailand.
In a further effort to find synergies, Mitsubishi will supply the Xpander to Nissan under the latter's brand from 2019. There is also a plan to start using shared chassis for pickup trucks in 2021.
The Renault-Nissan-Mitsubishi alliance sold more than 10 million vehicles worldwide in 2017, behind only Volkswagen. But with Ghosn eager to fill the hole in his map of global markets, Mitsubishi needs to earn its keep as a member of the alliance.
An executive at Mitsubishi Corp., which has been cooperating with Mitsubishi Motors in production and marketing in Indonesia and elsewhere in Southeast Asia, said there were expectations that the region would begin making an even greater contribution to the automaker's profits.
In fiscal 2019, Mitsubishi Motors aims to sell 1.3 million vehicles globally and log an operating profit of 150 billion yen, setting a new high for the first time in four years.
The Southeast Asian market will be key to Mitsubishi achieving its mid-term goal.
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