Dizano News – Mitsubishi’s U.S. dealers, desperate for compelling new product to reinvigorate the brand, will instead be getting the Mirage, a pint-sized, Thailand-built economy car engineered for the developing world.
It’s a sign of how the U.S. market has become a backwater for Mitsubishi, one that seems to have little influence in the company’s global strategy and product portfolio.
And why should it?
North America is by far Mitsubishi’s smallest market. In the United States, Mitsubishi expects to sell just 64,000 vehicles in its fiscal year ending next March, up from 57,000 the previous year. By contrast, Mitsubishi sold 357,000 vehicles in Southeast and Northern Asia in its last fiscal year, accounting for 36 percent of its global sales.
The last time Mitsubishi saw such volumes in the United States was in the 2002 calendar year, when its 345,111 units represented 2 percent of the market.
But while U.S. sales and profitability have suffered over the past few years — Mitsubishi has posted operating losses in North America every year since 2007 — the company isn’t about to walk away. With a factory and roughly 400 dealers here, Mitsubishi is entrenched in the United States. And a top Mitsubishi executive vows that the automaker is working on a revamped U.S. product plan to lift the brand out of its rut.
In a recent address to a dealer gathering in Chicago, Mitsubishi Motors Corp. President Osamu Masuko “reinforced that we’re not going to pull out from the U.S. market, first of all, and that there will be a product plan to be rolled out pretty soon,” said Masatoshi Hasegawa, executive vice president of corporate strategy for Mitsubishi Motors North America. “It’s a sign of real re-engagement, productwise, on the U.S. market as well. You don’t see it yet, but products are in the pipeline.”
Hasegawa added: “A lot of things will start happening around 2015. Right now, we’re in a transitional period.”
New design language
Hasegawa says Mitsubishi is working on a new design language for its SUVs and crossovers that will be announced soon. It will entail a new front-end design that will become the face of future vehicles, including redesigns of the Outlander Sport compact crossover and Outlander mid-sized crossover and a larger SUV that Hasegawa declined to name but that is expected to be the next-generation Montero.
Even so, a full-blown U.S. comeback isn’t necessarily on the drawing board.
In January 2011, Mitsubishi launched a three-year business plan called Jump 2013. A key pillar was plowing resources into fast-growing emerging markets where it could still get in at the early stages of expansion. It did invest about $110 million to retool its lone U.S. assembly plant in Normal, Ill., to produce the Outlander Sport, but most of the plant’s production is earmarked for export.
Meanwhile the company has invested considerably more in operations overseas. For example, Mitsubishi spent $607 million to build a third assembly plant at its production site in Laem Chabang, Thailand. The site is Mitsubishi’s biggest production facility and its engine for emerging-market growth, with capacity of 510,000 vehicles a year.
Mitsubishi’s product mix has mirrored that strategy. The Outlander and Outlander Sport crossovers are among the weakest-selling vehicles in their segments in the United States, despite being two of the company’s freshest products. But they can be sold anywhere in the world. Last year, the company stopped fielding a mid-sized sedan, the sweet spot of the U.S. car market.
As for the Mirage, a 74-hp minicar showcased at a media event here last week, Mitsubishi expects to sell just 7,000 units annually in the United States, competing in a segment known for thin dealer profit margins.
Mitsubishi executives acknowledge that they aimed the Thailand-built car primarily at overseas consumers but yielded to demands from U.S. dealers.
“They were pretty vocal in saying that there’s a need for it,” said Bryan Arnett, senior manager of product strategy at Mitsubishi Motors North America. “Younger buyers are still having a hard time getting into new cars … and [dealers said] there’s a growing need for a lower entry price into our franchise.”
Bargain hunters’ brand
That Mitsubishi dealers should want a lower-cost car to sell highlights how much the brand has eroded in the United States. In the past, Mitsubishi’s aggressive designs, driving dynamics and solid engineering helped it appeal strongly to young male buyers, says Ed Kim, an analyst at AutoPacfic. Today, most Mitsubishi buyers come for the deal, resulting in transaction prices that trail almost every competitor.
“It’s gone from something with a pretty well-established brand image to something that’s a little more muddy,” Kim said. “It really doesn’t stand for anything.”
If anything, Kim says, Mitsubishi’s niche now is as a low-cost brand for first-time new-car buyers and subprime borrowers.
According to data from Kelley Blue Book covering the first two weeks of September, the Lancer compact car had the third-lowest average transaction price in its segment, roughly $500 below the segment average; the Outlander and Outlander Sport crossovers garnered the second-lowest average transaction prices in the mid-sized and compact crossover segments, each more than $3,000 below average. This reality is not lost on Hasegawa.
“Let’s face the facts,” he said. “It is true that most probably with all the incentives that the transaction values would maybe be at the bottom, and we know we need to change that.”
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Source: U.S. has become a backwater for Mitsubishi
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