Making for the exit – start of a rush?

As I was completing last week’s blog, the news came out that Mitsubishi Motors had announced their withdrawal from Europe.  This seems genuinely to be a surprise to the whole team in Europe, who were just ramping up following the integration of Mitsubishi Motors into the Renault Nissan Alliance, and the transfer of some senior executives from Renault and Nissan to establish a new European HQ in Amsterdam.  A number of commentators have suggested that this will be followed by a number of other manufacturers who decide that the combination of tightening emissions regulations and a highly competitive market that will take two years or more to recover to 2019 levels is just the final straw.

I do not claim to know what strategic discussions are going on in the boardrooms of all the OEMs, but as I have not had any business relationship with Mitsubishi for some years, I feel that it is worth considering what factors may have contributed to the withdrawal decision, and then to consider whether other OEMs might share the same challenges.  Mitsubishi is a remarkable company in that over the years it has had some creditable products in certain segments, sharing almost nothing in terms of underlying technology, and all supported by a relative minnow in global terms – production volumes of just over a million units annually over the last few years.  Despite this, and without the benefit of any external alliance at the time, they brought us one of the first viable BEVs, the i-MIEV, a PHEV pioneer in the Outlander, one of the leading rugged pick-ups, the L200, and a tough SUV with a Paris-Dakar winning record, the Pajero/Shogun.  What wasn’t obvious was any coherent product or platform strategy, and no credible offering in small cars, other than the tiny kei cars in Japan where Mitsubishi is a leading player.

As part of the broader Alliance, their emissions results are pooled with Renault and Nissan, and the June 2020 forecast from PA Consulting  suggests that they were in pretty good shape, third behind Toyota and PSA in terms of the gap to be closed to meet the EU target.  It is certainly possible that looking forward, Mitsubishi becomes a drag on the Alliance performance and that this was a trigger for the withdrawal.  There is also a question mark whether the Alliance – which is already facing a range of challenges to reinvent itself following the collapse of Ghosn’s full merger dream – needs three brands in Europe (four if we include Dacia).  Infiniti has already gone, and in the new Alliance blueprint, Mitsubishi has been given responsibility for South East Asia where they produce almost 600,000 units in Thailand, Indonesia and the Philippines.  This compares with under 160,000 passenger car sales in Europe in 2019 according to ACEA.  There is also nothing to stop the Alliance continuing to sell selected Mitsubishi models under the Renault or Nissan brand, such as the L200 pick-up range.

Whilst this is not good news for the distributors and dealers who have represented Mitsubishi in Europe over many years, the bigger question is whether other OEMs will choose to exit.  We have all witnessed the in-out decisions around the American FCA brands, and most of us were surprised when GM chose to exist the European (and Indian) markets a few years ago.  In an era where globalization increasingly seems to be a dirty word, you cannot preclude a “global” player deciding to redefine that to exclude markets where they have a long-established presence.  Some players – small and not so small – must have their strategy departments and accountants running the numbers every time there is a market setback or new regulatory demand in Europe.  But none of them share the unique characteristics of Mitsubishi of lacking a coherent product plan and having partners who will maintain the presence from a stronger position.

With low volumes, some of the smaller players should be looking at different distribution approaches that allow them to maintain and even grow their share in a market where every euro of distribution cost counts.  Even some of the larger players should be considering whether distribution might be an area where they can steal an advantage over their European-headquartered competitors by not following a European-standard approach.  But for now, my money is on few if any further departures from the European scene, and indeed some additions as Chinese players including some of the BEV start-ups seize the opportunity.