Despite a modest increase in sales last year, Mitsubishi Motors earnings took a tumble during the most recent quarter. Bargain-basement pricing and rising incentives took much of the blame. But it hasn’t helped that the automaker has a miniscule product line-up that leaves little for dealers to sell. Company officials now hope to tap allies Nissan and Renault to help add new products to help put Mitsubishi back on the radar, especially in the critical U.S. market.
Mitsubishi is an all but forgotten brand for most American motorists, with a meager lineup largely targeting buyers on a tight budget. It marks a dramatic turnaround for an automaker that in the years leading up to the New Millennium was one of the fastest-growing marques on the U.S. market.
The automaker has been struggling for much of the past decade to right itself after a series of setbacks including rigged fuel economy numbers. But it has also struggled with not only one of the smallest product line-ups of any brand but the fact that most of its five offerings target buyers with extremely limited budgets.
“They need something to fill out their dealer showrooms,” said Sam Fiorani, lead analyst with AutoForecast Solutions. “$20,000 cars won’t do it.”
Low costs, high incentives, dwindling profits
It hasn’t helped that the automaker has had to saddle up low-price models with increasingly costly incentives. That took the blame, noted Automotive News, for a 19% slide in Mitsubishi’s operating profits for the October-December period, its third fiscal quarter.
The automaker did see a modest overall increase in sales for the 2023 calendar year, and demand for the Outlander — its most expensive product line — did more than triple in the U.S. during the fiscal third quarter ending Dec. 31.
But the final tally, at 19,604 of the SUVs, was little more than a rounding error for most competitors. And, overall, Mitsubishi managed to deliver just 87,340 vehicles in the U.S. in 2023, a 1.8% increase year-over-year.
Not only is the Japan automaker suffering from weak earnings but also so are its dealers. “It’s extremely difficult” to support a viable retail network at such low volumes, said Fiorani.
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At one time, Mitsubishi had a solid portfolio covering a broader mix of entry-level, mid-range and even near-lux models such as the Lancer, Eclipse, Gallant, Outlander, Mirage and Endeavor. That’s been paired back sharply as the company’s fortunes — and product development dollars — faded. And it could get even leaner, Fiorani just one of several industry watcher Headlight.News spoke to who expect the little Mirage to soon be dropped. The
Company officials want to find ways to rebuild the lineup. But, without the cash to go it alone, Mitsubishi is turning to its wealthier partners. In 2016, following the data cheating scandal, Mitsubishi became what former Nissan CEO Carlos Ghosn referred to as the third-leg of the stool that became the Renault-Nissan-Mitsubishi Alliance.
The larger Japanese automaker currently holds a controlling 34% stake in its troubled ally.
More products coming
“In North America, we will receive a supply of vehicles from our alliance partners to a certain extent. We will receive what is necessary in our overall product lineup,” Executive Vice President Hiroshi Nagaoka said during an earnings presentation. “In the electrification shift, new cars will become necessary. So we are discussing with our partners.”
What products it might get from its partners isn’t clear. Among the questions is whether there will be a direct replacement for the Mirage, the only vehicle in the U.S. market that still has an average transaction price of under $20,000 — factoring in MSRP, options and incentives.
Even if the company does find a low-cost replacement, it appears focused on moving back up-market with products like the Outlander which, said Nagaoka, caters “to premium customers by highlighting the value of our products and improving our overall customer experience.” Considering the relative success of the Outlander plug-in hybrid, it’s widely expected at least some shared models will feature electrified drivetrain technology.
Whether Mitsubishi can pull that off is uncertain, cautioned analyst Fiorani. “They were once a known entity,” he said. But about the only motorists in the U.S. who today know the brand are bargain hunters. While Outlander may have moved upmarket, it’s such a small niche, he said, that it will prove difficult for Mitsubishi to build brand recognition “at a moment when even established automakers” are having trouble standing out in a highly competitive market.