(JW Insights) Sep 28 -- Japanese automaker Mitsubishi Motors has decided to withdraw from automobile production in China. The company has started final withdrawal talks with its joint venture partner China's Guangzhou Automobile Group (GAC), reported Nikkei on September 27.

Mitsubishi's sales in China have been sluggish due to the popularity of electric vehicles and the rise of local brands. Other Japanese automakers are also struggling and might review their strategies in the country.

GAC Mitsubishi Motors has a factory in Hunan province. The company halted production in March; it will not resume operations.

GAC is expected to use the Hunan plant for EV production and try to maintain a certain level of employment. GAC has a 50% stake in GAC Mitsubishi, Mitsubishi Motors owns 30% and trading house Mitsubishi Corp. holds 20%. GAC Mitsubishi will remain as a corporate entity, but Mitsubishi Motors and Mitsubishi Corp. will withdraw their investments.

Mitsubishi sold 38,550 cars last year in China, down about 60% from the previous year. To reverse the trend, it launched a hybrid, the Outlander SUV, for the China market last fall, though sales came in below projections.

According to the China Association of Automobile Manufacturers, EV sales in 2022 increased by 80% to 5.36 million cars, accounting for around 20% of all new car sales in the country. Mitsubishi has no proprietarily developed EVs in China as GAC has supplied these vehicles.

In addition, competition with Chinese manufacturers is heating up. According to research firm MarkLines, passenger car sales in China in 2022 amounted to 23.56 million units, with Chinese brands accounting for 50.7% of those sales, 5.2 percentage points higher than the previous year.

Japanese companies picked up 18.3% of the market, down 2.8 percentage points, according to the Nikkei report.

Meanwhile, a Mitsubishi Motors spokesperson told Bloomberg News on September 27 that the company is “discussing future plans among shareholders and nothing is finalized as yet.”

(Gao J)