For years, Mitsubishi has languished in the U.S., struggling to hold on in the wake of fierce competition. Can its new “Drive for Growth” plan bring Mitsubishi back?
It’s no secret that Mitsubishi has been clinging on to the U.S. market for the past several years. At the turn of the 21st century, the Japanese brand was clearing over 300,000 units annually. Now, it struggles to clear a third of that – selling 100,000 cars a year. The passing of venerable nameplates – including the Lancer and the Galant – has largely erased Mitsubishi from the public consciousness. While the company brought the Mirage back in 2013, its lukewarm reception didn’t bode well for sales. Sure, the Mirage does its job – its simple, cheap, and doesn’t pretend to be something it isn’t. But these days, most car owners want more than cheap and simple. You don’t have to spend lavishly to buy a well-equipped car nowadays, either. The Mirage’s compatriots offer more features, more power, more car for not a lot of money. Take the Kia Rio, for example.
So, how can the company return to relevance? Well, the company recently announced its “Drive for Growth” plan, aiming to increase revenues in coming years. The highlight of the plan is a goal to increase annual unit sales by 30% in the next three years. It also aims to achieve an operating profit margin of 6% or more. To do that, it plans to increase R&D spending, expand its market shares, and launch new models. Overall, the plan focuses on three strategic initiatives: product renewal, core market growth, and cost optimization.
1. Product renewal
Mitsubishi realizes it can’t bank its future on the backs of aging platforms, as it did in the past. The Lancer and Galant’s last generations soldiered on for nearly ten years each without significant revisions. Its Drive for Growth plan intends to change that by outlining the launch of 11 new models. Of those, six will be all-new vehicles, while the rest will be updates to existing platforms. The company is also shifting toward SUVs and hybrids to comprise its lineup – accounting for 70% of its overall sales. That means new models like an updated Outlander as well as the new Eclipse Cross in coming years.
2. Core market growth
While its market share has diminished in recent years, the U.S. is still one of Mitsubishi’s core markets. The company opened a new plant in Indonesia this year, and plans to increase production to drive sales in Asian markets. In the U.S., the Drive for Growth Plan outlines intentions to improve dealer networks. The upshot? A target of 30% increased sales (to 130,000 units per year) by fiscal year 2019.
3. Cost optimization
As with any manufacturer, Mitsubishi realizes the key isn’t necessarily how much money you spend, but where you spend it. While the brand is increasing its R&D budget to more than 600 billion yen ($5.3 billion), it’s looking to reduce costs elsewhere to balance its operations. Most of the streamlining for Mitsubishi will come in the form of its involvement with the Renault-Nissan alliance. Furthermore, it plans to use this tie-up to avert sinking even more money into R&D to stay competitive.
Will Mitsubishi return to relevance in the U.S. Market?
Mitsubishi has a lot of work to do to appeal to American customers the way it used to. Despite that, chief executive Osamu Masuko remains confident. He states, “Drive for Growth will enable us to continue the transformation of the company over the next three years.” But will this plan be enough? Mitsubishi seems to think so. The company is moving forward with ambitious claims for the upcoming Tokyo Motor Show, saying it will be “unlike any other for the Mitsubishi Motors brand”.
