Mitsubishi’s China JV to cut staff costs after SUV sales dive

BEIJING/SHANGHAI (Reuters): Mitsubishi Motors’ (7211.T) joint venture with China’s Guangzhou Automobile Group (GAC) (601238.SS) on Thursday said it would cut staff costs to try to revive its fortunes after sharp sales declines for sport utility vehicles (SUV) such as the Outlander.

State-owned automaker GAC said in a statement the venture would look to “optimise” its employment as part of an effort to rescue and transform the venture.

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GAC did not say how many employees would be affected. It said it would restructure in accordance with law and regulations in China.

Mitsubishi said the stakeholders in the venture were considering reviewing aspects of the business so that it could be revitalised, adding the unit – which suspended production earlier this year – was facing difficult conditions.

The joint venture, known as GAC Mitsubishi Motors, was launched by GAC, Mitsubishi Motors and trading house Mitsubishi Corp (8058.T) in 2012, focusing on SUV sales in China.

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The announcement follows mounting pressure on the joint venture that makes Mitsubishi’s Outlander model. Mitsubishi said in April it would take a $78-million charge for slowing sales at the venture.

Mitsubishi did not say when the company planned to resume production in China.

SUVs represent the largest share of the growing electric vehicle (EV) market in China, where price cuts and the rollout of new models have taken sales away from combustion vehicles.

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Established automakers have been under deepening pressure in China where the market is shifting quickly to EVs and toward newer Chinese brands not operating in the joint ventures that had dominated sales for decades.

AlixPartners has forecast that Chinese brands would take more than 50% of the world’s largest auto market for the first time this year.

Mitsubishi’s sales in China peaked in 2018, when it recorded sales of over 141,000 vehicles, according to industry data. In 2022, sales had dropped below 33,000 vehicles.

Other foreign automakers are also under pressure to restructure and cut costs, limiting their exposure to China, or roll out new models that can compete on features and price with Chinese EV brands, analysts have said.

Hyundai Motor (005380.KS), the third-largest automaker by sales, said last month it would close another plant in China this year and focus its efforts in China on higher-end models, including SUVs and its Genesis-brand vehicles.