Sun. Jul 14th, 2024

Mitsubishi’s GAC Joint Venture Implements Cost-Cutting Measures

GAC Joint Venture Implements Cost-Cutting Measures

Mitsubishi Motors’ joint venture with China’s Guangzhou Automobile Group (GAC) is taking steps to address its declining sales by implementing cost-cutting measures. The joint venture, known as GAC Mitsubishi Motors, has experienced significant sales declines, particularly for its sport utility vehicles (SUVs) like the Outlander.

GAC, a state-owned automaker, has announced its intention to optimize the employment structure of the joint venture as part of its transformation and rescue strategy. While the specific number of affected employees has not been disclosed, GAC has emphasized that the restructuring process will adhere to Chinese laws and regulations.

Recognizing the challenging market conditions, Mitsubishi has acknowledged that the venture’s stakeholders are exploring various avenues to revitalize the business. Earlier this year, the unit temporarily suspended production, further highlighting the need for decisive action.

Established in 2012, the joint venture between GAC, Mitsubishi Motors, and Mitsubishi Corp aimed to focus on SUV sales in China. However, the venture has faced mounting pressure due to dwindling sales, particularly of the Outlander model. In response, Mitsubishi announced a $78 million charge in April, reflecting the impact of the sales decline on the joint venture.

The Chinese auto market is currently witnessing a transformative shift with the rising popularity of electric vehicles (EVs) and the growing market share of domestic brands. Established automakers are grappling with the challenges posed by this shift as consumers increasingly favor newer Chinese brands that operate independently, rather than traditional joint ventures.

Mitsubishi’s sales in China reached their peak in 2018, with over 141,000 vehicles sold. However, by 2022, sales had dramatically declined to less than 33,000 vehicles, as reported by industry data. This substantial drop in sales has necessitated the implementation of restructuring initiatives and cost-cutting measures.

Foreign automakers, including Mitsubishi, are under pressure to adapt to the evolving dynamics of the Chinese market. This includes finding ways to limit their exposure to China, exploring cost-cutting measures, and developing competitive models that can rival Chinese EV brands in terms of features and pricing.

The challenges faced by Mitsubishi’s joint venture are not unique, as other foreign automakers are also undergoing restructuring and adjusting their strategies in China. Hyundai Motor, for instance, recently announced the closure of a plant in China and a renewed focus on higher-end models, including SUVs and their Genesis-brand vehicles, to maintain competitiveness in the market.