Mitsubishi Motors has announced a significant revision to its annual net profit forecast, slashing it by 76% to 35 billion yen ($225 million) for the fiscal year ending March 2025. This stark adjustment comes as the automaker grapples with sluggish wholesale sales and escalating costs in competitive markets such as North America. The company had initially projected a net profit of 144 billion yen in May 2024, but underperformance in key regions and inflationary pressures on suppliers have forced a drastic downward revision.
Challenges in Key Markets
The automaker attributed the profit downgrade to weaker-than-expected shipments and higher marketing expenses, particularly in North America, where competition has intensified. Additionally, Mitsubishi Motors has faced rising costs in supporting suppliers impacted by global inflation. These challenges have compounded the company’s struggles, leading to a 52.7% year-on-year decline in net profit for the nine months ending December 2024, with earnings dropping to 78.54 billion yen.
Annual sales projections have also been revised downward, from 2.88 trillion yen to 2.76 trillion yen, reflecting the broader difficulties in maintaining market share and profitability.
Strategic Crossroads: Honda-Nissan Merger Talks
Amid these financial headwinds, Mitsubishi Motors finds itself at a strategic crossroads as it contemplates whether to join a proposed merger between Honda and Nissan. The automaker, which is 33% owned by Nissan, has delayed its decision until mid-February, citing the need to thoroughly evaluate the implications of the merger. While Mitsubishi is leaning toward remaining independent, President Takao Kato acknowledged the difficulty of surviving without ties to the two larger automakers if the merger proceeds.
The merger, which aims to establish a holding company by 2026, could reshape the Japanese automotive landscape. Mitsubishi’s strong presence in Southeast Asia, where it holds an 8% market share in Indonesia, makes it a key player in the region. However, the company’s declining operating ratios in Thailand and the growing influence of Chinese automakers like BYD add further complexity to its decision.
Southeast Asia: A Double-Edged Sword
Southeast Asia has long been a critical market for Mitsubishi Motors, accounting for approximately 30% of its global sales. The region’s growing middle class and demand for pickup trucks and family vehicles have historically driven growth. However, Chinese automakers are rapidly expanding their footprint, challenging Japanese dominance. In Thailand, for instance, BYD has already surpassed Mitsubishi in market share, prompting concerns about the company’s ability to compete independently.
Mitsubishi’s President Kato has expressed confidence in the company’s ability to support Honda and Nissan in vehicle production within the region. However, with Chinese competitors aggressively investing in electric vehicle (EV) production and infrastructure, Mitsubishi’s traditional strengths may no longer suffice to secure its future.
Looking Ahead
As Mitsubishi Motors navigates these turbulent times, the company faces a dual challenge: addressing immediate financial pressures while positioning itself for long-term sustainability. The decision on whether to join the Honda-Nissan merger will be pivotal, as it could determine Mitsubishi’s ability to leverage its Southeast Asian presence and technological capabilities in an increasingly competitive market.
For now, the automaker’s focus remains on mitigating the impact of sluggish sales and high costs. However, with Chinese rivals gaining ground and the automotive industry shifting toward electrification, Mitsubishi Motors must act decisively to secure its place in the evolving global market.
